Posted on 04/15/2006 4:02:32 PM PDT by ex-Texan
WASHINGTON - Rates on 30-year mortgages climbed this week to their highest point in nearly four years, a development that could put a further crimp in housing activity.
Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.49 percent for the week ending April 13. That was up from 6.43 percent last week and was the highest since mid-July of 2002.
Mortgage rates rose as Wall Street investors fretted that an improving jobs climate could drive up wages and thus inflation, analysts said. Those fears were fanned by a government report last week showing the unemployment rate dropped to 4.7 percent in March.
"The threat of higher inflation, as we all know, invariably leads to higher mortgage rates," said Frank Nothaft, Freddie Mac's chief economist.
Some economists believe rates on 30-year mortgages could reach 7 percent by the end of this year.
There are signs that rising mortgage rates are slowing the housing market, which registered record-high sales for five years in a row.
"If the past is any guide, the effect of rising interest rates is likely to be felt most visibly in housing markets," Federal Reserve Governor Donald Kohn said in a speech Thursday.
Sales of existing homes are expected to fall by 6 percent this year compared with last year, while new-home sales are expected to drop by 10.9 percent, according to the National Association of Realtors.
Home prices, which have posted double-digit gains in past years, aren't expected to go up nearly as much this year.
The association predicts the nationwide median price for an existing home will increase 6.4 percent this year, while the median new-home price will rise 2.3 percent. The median is where half sell for more and half for less.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 6.14 percent this week, up from 6.10 percent last week.
One-year adjustable rate mortgages increased to 5.61 percent this week, compared with last week's 5.57 percent. Rates on five-year, hybrid adjustable-rate mortgages averaged 6.13 percent this week, up from 6.11 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year mortgages carried an average nationwide fee of 0.6 point. Fifteen-year mortgages had a fee of 0.5 point, one-year ARMs carried a fee of 0.8 point and five-year ARMs had a fee of 0.7 point.
A year ago, 30-year mortgages averaged 5.91 percent, 15-year mortgages stood at 5.46 percent, one-year ARMs were at 4.30 percent and five-year ARMs averaged 5.31 percent.
We refi'd ours to 5 3/4 down from 8 1/2 (in 1991). Saved me a bunch of money and I went from a 30 year to 20 year mortgage
I bet a lot of folks who took out ARMs are getting nervous about right now.
Good thinking, stm! Very wise move!
My first mortgage was 12.5% back in 1984. We jumped on it when it dropped from 16%. Thanks Ronnie, for undoing the disasters of Jimmah's tenure.
7 percent...when we first bought a house 20 years ago our rate was 10 percent, and we thought we were fortunate when we were able to refinance at 8.
They can still refinance and lock in a 30 year fixed in the sixes. They needn't be nervous, but I would act now if I were them.
7% is still historically very low. My first mortgage was at 8.25% in late 2000.
Question: we've been thinking about selling our NYC condo for a while, but not compelled to. Should we do so now? Or do you think that prices will stay steady in NYC? Unlike many other places there seems to be actual demand here, not just speculation.
Depends on the neighborhood.
When I expanded my real estate "empire," in the last couple to 3 years years, I took out fixed rate mortgages as a hedge. At least when real estate prices took a dump as interest rates rose, I would have a relatively cheap mortgage, that as long as I owned the property, would "appreciate" in value. It was not rocket science. It was common sense.
If you live in the condo, and enjoy it, life is too short to fret. The transaction costs of buying and selling real estate are considerable to boot. And here in California, were have the Prop 13 game to play.
Rates have been on a steady incline. Better contact me fast if you want to get out of that ARM and into a relatively acceptable fixed rate. lol
Unless the home your set on is really expensive, these are still really great rates. In addition, your rate will always be lower if you are willing to pay more in points.
Chelsea
I can't wait for interest rates to hit 20%.
Wait you must be over 30 to remember 18% Jimmy Carter rates. The magic number for years and years was 10% and it is not likly we will see that in the next 10 years. These are the good times.
Over 50
Dec 19, 1980 under JC rates hite 21.5%
The good times were when I was buying nice brand new duplexes and homes in California for under $ 50,000. Back then interest rates were only about 7.5%. In a few years, interest rate on homes went up but home were still affordable. Now the same residences are being sold for $ 700,000. Interest rates will soon reach "7%" again according to the report. True APR rates may be about 7.5% again very soon. But interest rates alone do not make for 'good times.'
I read a report about a speculator who just dumped all his real estate holdings for about $ 6 million. He is going to sit on the sidelines with his cash for a while. A very sound decision. [Want to learn more?] As for myself, I believe the end of next year will tell the tale. "Watch front lawns time" is here.
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