June 3rd, 2009

Don’t Let Rising Rates Get You Down



Hoards of would-be refinancers are probably kicking themselves, thinking they blew their chance at capturing a rock-bottom rate — not necessarily. Rates for 30-year fixed loans have leapt from 50-year lows to just under 5.45% in one week. Despite the significant increase, fixed rates still remain in a range considered significantly affordable by most mortgage experts.

We want to know how the sudden rate increase has affected you.

The rate for a conforming 30-year fixed loan rose from 5.03% last Tuesday to 5.44% yesterday. The jump is expected to impact refinancers far more than homebuyers, who should be less swayed by the increase. For homebuyers, locking in on an affordable interest rate “is just one of a number of planets which must align in order to effect a successful transaction,” says HSH VP Keith Gumbinger.

At what level should consumers expect rates to be in the coming future?

“To be fair, consumers shouldn’t expect any specific level of interest rates,” said Gumbinger. “Other than that, with the Federal Reserve fully in this market, interest rates will be below where they would otherwise be in a ‘normal’ market.”

Despite the Fed’s multi-billion dollar involvement, why are mortgage rates rising? Our improving economy is just one reason.

“In a way, rising interest rates may be good news, in that they may (possibly prematurely) signal a coming end to the recession,” says Gumbinger. “Such signs of stability serve to take the market from the kind of panic levels we’ve become accustomed to over the past six months.”

From the LA Times:

Other reasons for the move, [Gumbinger] added, include bond investors’ demands for higher rates because of worries that inflation may return sooner than anticipated, a flood of new sovereign debt being issued, and “what seemed to be pretty shoddy treatment of GM bondholders by the administration.”

While refinancers are likely bitter over the spike in rates, experts are quick to remind them that rates not only remain in a favorable range, but that an improving economy will provide a much bigger economic benefit than any improvement in a given mortgage interest rate.

Don’t panic. Rates go up and rates go down. At the moment there’s no overwhelming evidence that suggests rates won’t drift downward again. Remember, this mild rise has only lasted one week.

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4 Responses to “Don’t Let Rising Rates Get You Down”

  1. Mitch Says: June 3rd, 2009 at 2:08 pm

    Of course, one of the problems still existing is that people aren’t getting loans, or not that many people are getting loans. The banks need to start letting go of some of that money; I know a guy who had over $750,000 in the bank and they told him he wasn’t qualified to refinance because he didn’t have a full time job. Just ridiculous.

  2. Tim Manni Says: June 3rd, 2009 at 3:10 pm

    Hey Mitch,

    It’s interesting you say that “not that many people are getting loans”. I just wrote an article on how the Fed has increased their re-payment restrictions (again) for TARP banks. While the act doesn’t bode well with the administration’s conservative critics, the White House’s defense is that they’re attempting to prevent banks from relapsing into their “non-loan making ways” as soon as they pay the money back.

    The example you provided about your friend, combined with Washington’s fears, really suggest this issue hasn’t gotten too much better. We’re going to have to re-strike that balance between healthy capital levels and accessible credit.

    Unemployment is another factor that cannot be overlooked. The unemployment fear from both banks and consumers is really affecting credit lines.

    Thanks for pointing that out — I overlooked credit conditions. Some of your Tweets are down-right hilarious, it’s been entertaining (and informative) following you,

  3. Moms2angels123 Says: June 4th, 2009 at 10:52 am

    I for one need rates to be under 5% to actually help me. I think they (mortage bankers, government) are underestimating the severity of the situation for many, many people. The unemployment situation is not good and more to come, more foreclosures down the pike, etc. I also think we should all check out the site:
    (of which I have no affiliation…just thought they had a good idea)
    and think about the idea of a “mortgage moratorium” for a period of (1) year – it would be a much CHEAPER SOLUTION and be MORE EFFECTIVE in getting our economy going at a much FASTER PACE. Why is our nation only helping bail out the corporations (any special interests here?) Now don’t get me wrong, I think our govement is doing the best job possible and I am so proud of them (what stress..aagh!) but I think that are not getting the nail on the head just yet. They keep saying that the consumers are the ones who actually drive our economy – yet I see no aggressive help in this corner – People have been getting frustrated by the “Help for Homeowners” programs – There are some success stories, yes, but the foundation for fast progress/processing is not there forcing people into desperate situations. I just want to see our nation be the best it can be. Thank you reading and hope you have a great day!

  4. Astounding Ways To Ruin Your Credit | Marketing Segmentation Says: June 11th, 2009 at 10:23 pm

    [...] Don't Let Rising Rates Get You Down | HSH Financial News Blog [...]

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About the HSH Blog's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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