Low Mortgage Rates - Are They History?
RATES RISE AFTER WEEKS OF FALLING, POTENTIALLY STALLING A REAL ESTATE RECOVERY!
Roughly two months ago, the U.S. Government, through the Federal Reserve, set monetary policy to drive mortgage interest rates down. The Fed began buying aggressively mortgage-backed securities. And rates - especially for borrowers with the strongest credentials - did fall!
It was just a few weeks ago that top borrowers could find a new home loan or mortgage refinance as low as 4.75%, according to Wall Street Journal Reporter Brett Arends, in the June 1st edition of The Journal. Today, rates often exceed 5.5%, a few topping 5.75%, or more, for borrowers with somewhat blemished credit.
Indeed, the rising U.S. Government Debt, along with a hoped-for overall economic recovery, have pushed up 10-Year T-Bill Yields to over 3.67%, versus the more modest 2.0% of only a few weeks ago. These rising 10-Year Bills, in effect, drive up consumer mortgage rates.
Seeking a re-fi on your current mortgage? Today, versus a couple of weeks ago, you'll save less when you get your new loan, in some cases taking this scenario off the table for many. Less monthly mortgage savings equal less monthly disposable income to cover other expenses.
Buying a new home? A 0.50% jump in the mortgage rate can add roughly $100 each month for a borrower eying a $400,000 home in Chicago. Even homes with recent price reductions, as a result, will cost more each month to own. Will prospective new buyers take pause before they buy - or delay their buying decision?
Selling your current home before you buy a new one? From a seller's perspective, higher rates drive up costs for prospective borrowers, resulting, ultimately, in fewer qualified buyers for your home. If the U.S. is on the threshold of a Real Estate Market Recovery, higher rates might throw in a wrench at the wrong time!
Even the stock markets will be impacted as rates rise! Higher housing costs leaves less to invest. One positive sign to economic recovery at the end of 2008 - dramatically falling gasoline prices - has taken a very negative turn, as prices for a gallon of regular here in Chicago have nearly doubled since lows of $1.65/gallon or so late last year.
Many experts predict continued upward interest rate pressure will continue, at least in the short term. Will it damage the chances for housing recovery?
Hope not!
DEAN MOSS & DEAN'S TEAM CHICAGO
