Mortgage rates continue climbingINTEREST RATE ACTIVITY

The average 30-year, fixed-rate mortgage has climbed more than half a percentage point in the last month. Such a spectacular rise has happened a few times in the last decade, but borrowers haven’t exactly been clamoring for a revival.

The benchmark 30-year fixed-rate mortgage rose 23 basis points, to 6.84 percent last week, 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 0.27 discount and origination points. One year ago, the mortgage index was 6.71 percent; four weeks ago, it was 6.32 percent. In Bankrate’s weekly survey, the 30-year rate hasn’t been this high since July 19, 2006, when it was 6.89 percent.

The benchmark 15-year fixed-rate mortgage rose 20 basis points, to 6.53 percent. The benchmark 5/1 adjustable-rate mortgage rose 15 basis points, to 6.67 percent.

It’s been more than three years since mortgage rates rose so dramatically.

In March and April of 2004, the 30-year fixed rose 60 basis points in four weeks, to 6.06 percent. It kept going up, but at a slower rate, for a few weeks. By August, the rate on the 30-year fixed was under 6 percent again.

In July and August 2003, the 30-year fixed went up an amazing 82 basis points in four weeks, topping out at 6.43 percent. Then, over the next seven months, rates dropped more than a percentage point, all the way down to 5.41 percent in March 2004.

There were similar ups and downs in 2000, and in the months after the terrorist attacks of Sept. 11, 2001. All of these rate spurts had something in common: Rates went up dramatically, and then fell much more slowly, eventually erasing the abrupt gains.

“I’ve got to believe to some extent that the pendulum’s got to swing back a little bit,” says Steve Habetz, owner of Threshold Mortgage in Westport, Conn.

Habetz says he’s scratching his head looking for an explanation as to what caused “this ugly, ugly move in the marketplace.” New Zealand’s central bank raised interest rates by a quarter-point last week, but anyone who blames the Kiwis for rising mortgage rates has tongue wedged in cheek.

The consensus explanation is that the economy is getting warm reviews and stocks are drawing good crowds all over the world. Consequently, investors favor stocks over bonds. To attract investors’ dollars, bond yields must rise. Like an eager understudy, mortgage rates follow bond yields on their upward rise.

Ironically, rising rates have been boffo at the box office: Mortgage applications increased about 6 percent last week, according to the Mortgage Bankers Association. Most likely, these applicants jumped off the fence when they realized that rates were rising too fast for comfort.

Normally, fewer people refinance their home loans when rates rise like this. But “you’ve got a lot of people that are in adjustables who better think about doing something,” Habetz says. Some ARM borrowers might refinance into fixed-rate mortgages, even at substantially higher rates, just to eliminate the possibility of skyrocketing ARM rates.

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