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Health & Fitness

Mortgage rates rise

WHAT HAPPENED TO MORTGAGE RATES?!?

 

If you’ve been on the refi or home buying fence, waiting for rates to dip just a little more to 3.5% or 3.375%, you may have missed out. Since mid June, interest rates on a 30 year fixed mortgage have jumped nearly 1 ¼ %.

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Although still historically low, we have been spoiled with rates in the 3’s for the last 2 years. A slow economy along with a slow housing market all contributed to the steady decline that helped keep rates low.

Find out what's happening in Algonquin-Lake In The Hillswith free, real-time updates from Patch.

 

Why the higher rates?

A few things contributed to the quick spike, but nothing has had a bigger impact then when Federal Reserve Chairman Ben Bernanke stated in mid June that the Fed may slow down it’s purchasing of mortgage backed bonds.  Just the hint of this without it even taking place put the mortgage rates on a quick pace to rise, jumping overnight.

 

A common misconception is the Federal Government dictates mortgage interest rates.   Fact is that mortgage rates are directly related to the yield on 10-year U.S. treasuries. So as the 10 year Treasury rises or falls, mortgage rates follow.

 

What does this mean for you? 

For example, with $200,000 loan, the monthly principal and interest payment having a 30 year fixed rate at 3.5% is $898.  Take the same loan amount at 4.5% and your monthly principal and interest payments goes up to $1, 013, an increase of $115 a month.  Although not necessarily life changing, a difference of $115 may disqualify some people that were borderline qualifying for this mortgage loan amount.

 

Don’t Panic!

Yes, rates have had a large increase in the past 2 months, but predictions are that rates should level off or slightly decline in the coming months. But it does appear the days of rates in the mid 3’s may be behind us.

 

There is a bright side!

A savvy home buyer can still find homes for sale that are priced well below what we’ve seen in an average housing market. The equity potential is fantastic!

 

Want to feel even better? 

Talk to someone that had a mortgage in the 1980’s, when rates were ranging from 8%-13%! I’m amazed how many calls I get a week from homeowners that still have an interest rate over 6%. With the HARP programs and FHA Streamline refinances, there are still plenty of opportunities to take advantage of these low mortgage rates.

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