Don’t Let Rising Rates Get You Downby Tim Manni
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.
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.