June 4, 2013
Fixed Mortgage Rates Tick Up To Near Two-Year High
At the end of last week, 30-year fixed-rate mortgages averaged 3.81 percent (with 0.8 points), up from 3.63 percent two weeks before, the highest rate in over a year. A year ago the 30-year mortgage rate averaged 3.75 percent. The all-time low of 3.31 percent was recorded this past November.
As we pointed out in January, while rates had been dropping, they were set to start ticking-up this year. And as a plugged-in reader notes, in the past couple of days the average 30-year rate appears to have ticked up to over 4 percent for the first time since 2011.
The 30-year fixed mortgage rate has averaged 8.61 percent over the past forty years.
∙ Mortgage Rates Drop, But Set To Start Ticking Up This Year? [SocketSite]
∙ Fixed Mortgage Rates Highest in a Year [Freddie Mac]
First Published: June 4, 2013 10:00 AM
Comments from "Plugged In" Readers
Well, it was bound to happen sometime.
Of course, the rates still are ridiculously compared to the historic trend. But it is likely throw some, some, cold water on the housing market since borrowers won't be able to borrow as much.
The Rates vs. Prices trend should be interesting to watch.
Posted by: badlydrawnbear at June 4, 2013 11:27 AM
The good old days. B of A was paying me 13% on one
Then in 82 i bought my first house 18% on a 180k
The smart money bought 30 year fed notes paying 14%
Posted by: mark at June 4, 2013 12:32 PM
I think rates are bound to return to average levels at some point. One question:
Will be it "recent" or "historical" averages? If inflation stays as tame as today then I think the 1970s and 1980s could be removed from these stats and averages would be in the 6% range or less.
How fast can we get there? I'd say the faster the better. The last thing we want is a RE bubble redux. That will suck for the market, but Real Estate health should be a consequence of an economical climate, not a cause. Policy makers have been using RE to push through much of the stimulus for a lack of alternative (and political consensus). It's time for the economy to stand on its 2 feet without expecting the crutches of RE gains and HELOC madness.
Posted by: lol at June 4, 2013 12:43 PM
Pretty much agree with everything you said in that post.
Posted by: lyqwyd at June 4, 2013 12:47 PM
It's not going to be soon, imo. Fed will make sure rates stay low for another year and half at least.
Posted by: Rillion at June 4, 2013 3:52 PM
I'm sure someone somewhere just made their final payment on their 30 year fixed loan at 18.45%. But this would be the anomaly outlier and the fact is that most owners refi as appropriate. I would guess that north of 80% of all residential morgagte debt in the US is on the books at sub 5%, and maybe 4%, and locked in a reasonably long period of time. I'm not sure where the markets are heading but it sure is starting to feel frothy out there. But it took 24-36 months from 2006 when the markets were in full boil mode for things to 'pop'. So hard to know if we still have 2-3 years left in this run. The only thing that is out there looking IS the interest rate itself. I would be highly surprised to see anything north of 5% in the next 2 years and 6% for the foreseeable future (4-5 years). It's still pretty cheap money. But let's face it, most homes north of $5M are seemingly cash deals and the $2M+ homes are not particularly riskly loans like they used to be circa NegAm, NoDoc, etc...
Haven't said this in a while, but anyone buying a home with less than a 5 year horizon, 7 on the safe side, is taking an extraordinary capital risk. Good luck out there!
Posted by: eddy at June 4, 2013 3:57 PM
The trend is more obvious on the 1 year graph.
The worm has finally turned and both the 10 year and mortgage rates have solidly and probably irrevocably moved higher. I anticipated this about six months ago and started pulling in the duration on my bond funds. If you haven't refi'd yet, it's not too late! Though I am sure the mortgage brokers are all swamped right now.
Posted by: NoeValleyJim at June 4, 2013 10:04 PM
Ah, that chart brings back memories. I remember buying my first place in the 80's with a variable rate loan that had an initial artificially-low "teaser" rate of 10% for the first 6 months that went up to 16% as soon as it started varying.
I can also remember having a passbook savings account at World Savings that paid 18%.
Posted by: p3p at June 5, 2013 8:04 AM
Yup. I purchased my first place in 94 at 8% fixed. My parents at that time were still carrying their early 80s mortgage at 16+% but on such a low amount compared to equity that they didn't really bother. Mortgage broker fees were simply not worth the move and they didn't want to "extract equity" like many others.
As a side note just 5 years ago, I turned down 5-year CDs at 5% or so at WaMu that I had deemed way too low. I would have outperformed the S&P!
Posted by: lol at June 5, 2013 10:27 AM
Of course, the serial refi thing does not benefit anyone when interest rates are rising . . .
Posted by: snon at June 5, 2013 10:49 AM