Friday, June 1, 2007

Spike in mortgage rates

Rates on 30-year fixed mortgages rose again in the week ending May 31, 2007. The 30-year fixed-rate mortgage averaged 6.42%, up from 6.37% a week ago. 15-year fixed-rate mortgages climbed up as well, to 6.12% from 6.06% last week. 5-year hybrid adjustable-rate mortgages were at 6.19%, up from 6.02%. The 1-year adjustable-rate loan was the only type of mortgage to decline, with an average of 5.57%, down from 5.64%. Last year this time, the 30-year mortgage rate was 6.67%. 15-year fixed-rate mortgages and 5-year adjustable-rate loans carried an interest of 6.26%, and 1-year adjustable-rate loans were at 5.68.

Freddie Mac attributed the rise in interest rates to improving business and consumer spending, which are signs of a strong economy – outside of the housing market. Rates are currently at the highest level in 8 months.

Whatever the reasons, rising interest rates bode nothing good for the housing market. With higher mortgage rates come bigger monthly payments, which means that fewer buyers will be able to afford new homes. Considering the already existing glut on the market, a recovery in the near term seems impossible. The National Association of Realtors and the MBA pushed back their forecasts for a rebound in the Real Estate industry from mid-2007 to early 2008.

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