Real Estate NewsRate Schedule: Mortgages Due To Arrive At 8, Continue Up
If you haven"t already found a seat on the low-rate mortgage gravy train, you"d better hurry up and get on board.
Mortgage rates are picking up so much steam you can almost hear the steady clickity-clack of rates ratcheting up the line.
Rates on 30-year, fixed-rate mortgages jumped 20 basis points this week to 7.99 percent and the 15-year fixed-rate increased 16 basis points to 7.53 percent. The 1-year adjustable rate moved up 14 basis points to 6.38 percent, according to North Palm Beach, FL-based Bankrate.com.
That"s just about full percentage point higher than rates enjoyed a year ago when refinancing was all the rage. Those low rates also helped fuel a record-breaking home sales market for nearly two years.
"The bond market has been very volatile in the past week, not sure whether inflation would remain subdued or if it would increase slightly, thus causing the Federal Reserve to tighten credit," said Robert Van Order, Washington, D.C-based Freddie Mac"s chief economist.
"That uncertainty has pushed all interest rates higher," Van Order added. Since rates made it past the 7 percent curve in early May, they"ve sped ahead eight times during the last 13 weeks -- like a runaway diesel without an engineer at controls.
The national average for the 30-year, fixed-rate mortgage bottomed out at 6.46 percent last October, but has since climbed 150 basis points -- 24 percent in just 10 months, according to Bankrate.com.
Bankrate.com says the same global mess that helped pushed rates to record lows are now having an opposite effect on the U.S. economy and mortgage rates. Now that Asia is getting over it"s financial flu, and Europe"s economy is looking more fit, investors no longer consider the U.S. market the only depot for their cash. As investments in U.S. markets fall, bond yields must climb to keep investors" attention and interest rates, including mortgage interest rates, are along for the ride.
Rates remain "comparatively" low, at least compared to the 9s and 10s in the early 1990s and late 1980s. And don"t forget the 16s and 17s in 1981 and 1982.
Today"s mortgage consumer, however, has little memory of those days and the new rates are hitting them like a freight train coming around a blind curve.
Mortgage applications were off this week nearly 21 percent compared to a year ago when rates were bottoming, according to the Washington, D.C.-based Mortgage Bankers Association of America.
Also then, refinanced mortgages were peaking, accounting for about 55 percent of all new loans. Now only about 20 percent of all new mortgages are refis, according to the association.
That"s not surprising.
A $200,000 mortgage at the market low 6.46 percent cost only $1,258.88 a month in principle and interest. That same mortgage at 7.99 percent today cost $207.56 more a month -- a whopping $2,490.72 a year.
There goes that Amtrak trip-for-two trip across the country.
Maybe more.
In yet another blow for those hoping for lower interest rates, the government said Aug. 5 that labor costs zoomed higher during the second quarter while productivity fell off sharply -- precisely the opposite of what the Federal Reserve wanted to hear, according to Warren Myer, CEO of Myers Internet Services, in San Jose, CA.
What"s a mortgage consumer to do?
If you are shopping for a home and haven"t put the brakes on mortgage rates with a rate lock -- in writing -- you might as well tie yourself to the tracks. Rate locks guarantee a certain rate for a certain period of time.
Otherwise, your options are to come up with more money (say by cashing in those stock market returns, which are also suffering market turns right now), consider an adjustable rate mortgage, buy less home or gamble the rates will caboose the train back into the station.
For more interest rate news, check out the Realty Times Interest Rate Watch