June
2007
Mortgage rates rise toward 5-year high
Surge adds to burden on already struggling real estate markets
By Kimberly Blanton, Globe Staff | June 15, 2007
Mortgage rates are nearing a five-year high, raising the cost of home ownership for buyers by hundreds or thousands of dollars a year at a time when real estate markets are struggling with tepid demand and a surplus of houses for sale.
The average rate for a traditional 30-year fixed mortgage jumped to 6.74 percent, from 6.53 percent a week ago, Freddie Mac, one of the nation’s largest mortgage investors, said yesterday in its weekly market survey. That was the biggest one-week jump since 2004, and in just one month rates have come up by more than one-half a percentage point.
“This is the kind of thing that may prevent the housing market from recovering more quickly,” said Larissa Duzhansky, regional economist for Global Insight, a Waltham consulting firm. “This is just another downward pressure,” she said.
First-time home buyers are usually hardest hit by higher borrowing costs. This group typically is less financially prepared to absorb unexpected cost increases and may not have enough money to increase down payments as a way to lower their expenses. For example, the monthly payment on a $300,000 mortgage is $1,946, about $100 more than it was just three months ago, said Brian Koss, managing partner of lender Mortgage Network Inc. in Danvers.
Mortgage rates are going up due to rising yields on 10-year Treasury bonds, which mortgage rates are linked to. Treasury rates are increasing because of growth in the US and global economies, which increased the demand for borrowing to finance business activities, boosting the price for credit, or interest rates.
But economists said they do not anticipate a wider impact on the economy overall because US growth is accelerating and is strong enough to offset the effects of a housing downturn. While, the US economy grew at an anemic 0.6 percent annual rate in the first quarter, it is expected to post stronger growth in the second and third quarters, possibly exceeding 2.5 percent. The housing industry accounts for about 10 percent of the economy and its recent troubles sheared about 1 percentage point off the growth rate.
Well I am glad this won’t effect the whole economy but next time it would be nice to get a little warning maybee a heads up…?
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