No End Foreseen in Mortgage Rise

29 June 2013

The recent jump in mortgage rates will not likely happen again but years of basking in low rates might be over.

According to Freddie Mac, average 30-year fixed rates jumped to 4.46 percent in Thursday, reaching its highest in almost two years.

The short run effect could drive some buyers out of the market while others to enter before rates get any higher and they get priced out. In the long run, the mortgage increase could dampen the steadily increasing prices of homes in markets across the nation and possibly stabilize the housing market recovery, therefore removing any fears of a new bubble.

The increasing rates won’t stop the housing recovery and its impact would be relatively mitigated on home prices. In short, the jump would be enough to slow down the housing recovery without its losing momentum.

Many areas of the country have already experienced the impact of the increased mortgage rates. In several markets, the number of customers decreased to 11 percent. As predicted, several buyers are now seeing themselves outside the price range on homes they previously could afford before the mortgage jump.

The mortgage increase was the product of the Fed’s trimming down its stimulus policies.

The sales of pending homes also increased, reaching its highest level since 2006. This is a sign that many buyers who were still on the fence about closing a deal are now grabbing homes before rates increase further and their budget gets further away from the average price ranges.