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2013-06-28 15:33:09
Rising Interest Rates



No one expected these artificially low interest rates to last forever. 

Mortgage rates today are about what they were in the spring of 2012, when many thought the cost of borrowing was still amazingly low.  Interest rates will likely continue rising.  By late, 2014, the rate for a 30-year mortgage is forecast to rise up to 5.6%. 

Interest rates were still hovering at record lows of about 3.5% in early May, only to cross the 4% marker a few weeks later for the first time in more than a year. 

Yes, higher interest rates do make buying a home more expensive; the rule of thumb is that for every one-percentage-point increase in mortgage rates, homebuyers pay 10% more.  A slower rise in interest rates isn’t likely to stall the housing markets recovery.  The rapid rise that’s fueling the housing recovery could actually help detail it, as it makes purchases more difficult for potential buyers.

Affordability remains near historic highs, despite the recent rise in rates and home prices.  While banks might be charging higher rates, they are likely to ease lending standards for mortgages due to the stronger home prices.  That should make it easier for some buyers to qualify for home loans.

During the last housing boom, interest rates were markedly higher: The 30-year mortgage hovered between 5.5% to 7% between 2005 and 2006. 

The Fed, which has been essentially buying down mortgage rates to historic lows during the economic downturn, is ending their assistance programs.  Most experts expect rising interest rates to be the new norm as our economy continues to grow stronger.

While higher rates have dampened the number of homeowners refinancing, they still make up a bulk of all mortgage applications.  In May, refinance applications made up 73% of all mortgage applications. 

The National Association of Realtors warned that the home price growth is too fast and that the market needs significantly more home building and better access to credit for buyers.

With interest rates now clipping right along with home prices, and if incomes fall too far behind the housing affordability will decline and demand will thus follow.

Current interest rates: (as of June 28th, 2013)







Conv. 30yr



Conv. 15yr










*Rates change daily and are based on credit worthiness.  This may or may not reflect your final rate.

You will want to be in your new dream home before this great opportunity disappears!

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