June 14, 2007
JustQuotes (And A Note): And Yet Money Is Still Relatively Cheap
“The average rate on 30-year fixed-rate loans climbed to 6.74 percent for the week ending June 14, from 6.53 percent the previous week. That marked the biggest one-week increase since July 2003….Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects mortgage rates to top out near 7 percent by the end of the year.”
[Editor’s Note: A rate shift from 6.53 to 7.00 percent would requite mortgage balances to drop by almost 5% in order to maintain the same level of payment affordability.]
∙ Mortgage rates: biggest spike in 4 years [CNNMoney]
∙ What’s The Treasury Got To Do With It? (Quite A Bit) [SocketSite]
First Published: June 14, 2007 11:25 AM
Comments from "Plugged In" Readers
So the question is will the rate run-up pull any of the fence sitters who've been waiting for prices to drop into the market? I'm not an agent, in the mortgage business, nor do I have property for sale presently, but to the fence sitters my advice would be to forget about the potential incremental price drop and look at the total cost of a half point rate increase over a 30 year mortgage. The best time to buy may very well be right now . . . .
Posted by: AnonN at June 14, 2007 8:30 PM
I think your logic would be true if you were the only person in the market using a loan, while everyone else was paying cash. I believe that most everyone in SF outside of the ultra-high luxury market is using a loan with a fairly high LTV to finance their purchase. In that case, the collective financing power of everyone will decrease as mortgage financing interest rates rise, making housing prices fall. The total payment on the loan will likely be the same, but the interest will make up a larger portion of the payment, cutting back on the principal that can be paid off.
You would actually be better off purchasing when interest rates are high, under the assumption that at a later date you would refinance the mortgage into a lower rate. You can always go back to the lender for better terms, but you can't go back to the seller years down the road for a lower price.
Posted by: M at June 15, 2007 8:44 AM