Mortgage interest rates are on the rise. For five consecutive weeks 30 year fixed mortgage interest rates have gone up and it has caused a panic in both the lending and housing markets. The weekly rise has averaged 10 points bringing interest rates that were around 3.50 percent to currently tipping over the 4 percent mark. Applications for home loans have spiraled down.
Feds Artificially Prop Banks
Why the rapid increase in historically low mortgage interest rates? The Federal Reserve (Feds) have been printing money (literally) and buying up mortgage backed securities and treasury bonds. Up to $85 billion a month has been printed and spent in an attempt to keep interest rates down low. It has worked. But the Feds kept their purchases open ended, meaning no end date was ever established for their purchases. Now it seems the Feds are ending their spending spree and ending it quicker than thought.
“Up until recently, expectations were that the Feds would begin to taper purchases of mortgage-backed securities (MBS) and Treasury bonds late in 2013, but that timeframe appears to have moved to September, possibly sooner,” said Keith Gumbinger, vice president of HSH.com, a mortgage information company,” Reports CNN Money
Mortgage Interest Rates: Applications Plummet
Already loan applications have started to plummet. In just one week applications for home purchases fell 11.5 percent. But according to the Mortgage Bankers Association (MBA) the loan application decline would be much worse if Memorial Day holidays are not factored in.
“On an unadjusted basis, the Index decreased 20 percent compared with the previous week. The Refinance Index decreased 15 percent from the previous week and is at its lowest level since the end of November 2011” according to MBA.
Refinancing a home is major part of mortgage lending. It makes up approximately 70 percent of all mortgage applications each week.
So exactly what type of mortgage interest rates are we looking at now?
“The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.07 percent, the highest rate since April 2012, from 3.90 percent”
The climb in mortgage interest rates could have an added impact along the Crystal Coast particularly with beach and waterfront properties. Interest rates for larger purchases started off higher and are climbing too.
“The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.20 percent, the highest rate since May 2012, from 4.07 percent” according to MBA.
15 year fixed mortgage rates have risen also but not so severely. Last week the national average was at 3.21 percent. This week averages are at 3.28 percent. The last time these rates were this high was at the end of April, 2012. If you can handle a 15 year loan then now may be the time to get it. Not only are the rates lower but the debt is for half the time of a traditional mortgage.
If you are really interested in tracking mortgage interest rates and want to try to see where they are headed then CNN Money offers the following advice.
“For clues to the direction of mortgage rates, look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant.”
It is no mystery. The Feds have been printing money (literally) at the tune of up to $85 billion a month and buying mortgage backed securities and treasury bonds. This debt that the Feds have been creating is not tallied with the rest of the national debt. The trillion(s) of dollars being created to keep interest rates down will end. At this point in time it looks like it will end rather abruptly. All markets associated with lending will be impacted. Let’s see if it’s a car crash or a fender bender.
The real estate industry is always in a state of flux. You need an experienced Realtor like Margaret Hitchcock to help guide you along the way. Margaret is a multi-million dollar a year producer experienced in working with banks, mortgage lenders, attorneys, listing brokers, buyer brokers, helping out of area clients, foreclosures, short sales, home inspectors and a whole lot more. Call Margaret Hitchcock of Hitchcock Realty today at (252) 269-2893. You’ll gain confidence with a conversation with Margaret. The confidence that only years of experience and knowledge can bring.