Homebuyers may have to kiss those low mortgage rates goodbye

It may be time to kiss record-low mortgage rates goodbye. They jumped this week, as investors bought into the notion that the economy in the United States is strengthening and the situation in Europe has stabilized.

The benchmark 30-year fixed-rate mortgage rose 14 basis points this week, to 4.29 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 0.42 discount and origination points. One year ago, the mortgage index was 4.96 percent; four weeks ago, it was 4.16 percent.

The benchmark 15-year fixed-rate mortgage rose 10 basis points, to 3.48 percent. The benchmark 5/1 adjustable-rate mortgage rose 10 basis points, to 3.24 percent. This is the highest level the 30-year fixed rate has reached in five months. It was 4.33 percent Oct. 26.

The optimism among investors may wear off, but it's unlikely rates will return to the bottom, said Bob Walters, chief economist at Quicken Loans.

"I think we may have seen the absolutely lows," he says. "Europe was really driving us lower as people worried about Greece defaulting. That was causing lots of money to pile into bonds. But the concern of a European collapse is abating."

Most of the recent economic data, including the jobs report, indicate a positive sign. However, it "doesn't mean the economy is out of the woods by any means," said Brett Sinnott, director of secondary marketing at CMG Mortgage in San Ramon, Calif.

Nearly 13 million people remain unemployed. "I think the optimism will be short-lived," he said. "But I don't think we're going back to (yields of 1.7 percent) on the 10-year Treasury note."

The yield on the 10-year Treasury remained below or close to 2 percent when rates reached the bottom. This was one of the forces pushing rates down. This week, the yield reached a five-month high of 2.38 percent. It fell slightly when Federal Reserve Chairman Ben Bernanke reminded investors the global financial situation is better but far from rosy.

Should you wait? Probably not, said these mortgage experts.

"Years from now, you'll hear stories of how you could get a 30-year fixed mortgage at 4.5 percent," Walters said.


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