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As expected, mortgage rates continued their
climb this week, reaching a level not seen since July, and
potential mortgage buyers sat on the sidelines.
The benchmark 30-year fixed-rate mortgage rose
15 basis points to 6.15 percent, according to the Bankrate.com
national survey of large lenders. A basis point is one-hundredth
of 1 percentage point. The mortgages in this week's survey
had an average total of 0.37 discount and origination points.
One year ago, the mortgage index reached 5.46 percent.
The benchmark 15-year fixed-rate mortgage rose
11 basis points to 5.67 percent. The benchmark 5/1 adjustable-rate
mortgage rose 17 basis points to 5.58 percent.
If you're in the market for a new home, you may be feeling
a little beaten up by the numbers. The Federal Reserve's inflation
alert seems to be moving from yellow to orange. The number
crunchers at the Labor Department back that up, saying February's
data show the biggest price hikes for consumer goods since
September. All this uncomfortable news made the 10-year Treasury
rate jump above 4.6 percent, up from 4.51 percent at the end
of last week. Since mortgage rates are related to the 10-year
Treasury, they did the inevitable.
Jim Bradley, president of Atlanta-based American Residential
Lending, says some of his clients are feeling the pain.
"We've got a couple of people who are buying a new home,
and when they started rates were at 5.375 percent. They thought
rates might drop a bit so they chose to float their rate with
the market; but now rates have gone up, due to Fed policy."
Quicken Loans' chief economist Bob Walters says we might
see rates fall back in the very near term but then rise intermittently
throughout the year to possibly the mid-6 percent range.
"A lot of us are too quick to say the sky is falling
-- jump in. I think interest rates will remain attractive
for the coming year. We've been lulled to sleep a bit with
rates that have been so low and no volatility. We've entered
a phase of increased volatility, but we have to put it in
perspective."
But for many people the rise in mortgage rates is jarring,
and they wonder if it's really necessary. Not everyone is
seeing the economy barreling back to life; and not everyone
sees budding signs of inflation as necessarily evil.
"If the Fed's trying to slow things down, they're doing
a wonderful job," says Bradley.
"I rely on people borrowing money. If they're not, then
I'm not making money. Since the first of the year it's been
tremendously slow, the slowest in a long time. We're seeing
it in purchases and refinances. People purchasing now are
seeing much higher monthly payments because of interest rates
rising.
"The Fed needs to think about whether they want to water
down the real estate industry. Real estate has been keeping
this economy alive and, when you think about the jobs that
go with it, it's perplexing to say the least."
There's little doubt some potential buyers are shying away
from the rising rates we've been seeing. The National Association
of Realtors reports that sales of existing homes dropped 0.4
percent in February; and mortgage applications declined 9.5
percent last week, according to the Mortgage Bankers Association.
Economist Walters says there's a good chance the 10-year
Treasury will simmer down a bit and that could mean lower
mortgage rates in the very near term. But the long-range outlook
for rates is definitely higher, and mortgage shoppers might
do their bank accounts a favor by locking in sooner than later.
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