Mortgage Rates About to Reach Seven Percent

Mortgage rates have been steady but are threatening to reach seven percent. Interest.com writer, Mike Sante, explains why the public should expect mortgage rates to reach seven percent and higher over the next few months in his article, “Mortgage rates are holding at 6.9%, but could still push above 7% over the next few months.”

Mortgage rates have been relatively steady for the past month. “Our latest survey of major lenders found the average cost for a 30-year fixed-rate loan – the most popular way to pay for a house – rose to 6.89% this week after falling to 6.87% last week, and just topping 6.9% the two weeks before that.”

Even though mortgage rates are higher than they have been in four years, they are reasonable considering the current status of the market. “Rates are only a little more than a point-and-a-half higher than the record low reached three years ago. And we are certainly no where near the double-digit rates of the ‘80s and early ‘90s.”

Even though the market is said to be “cooling,” this year may mark the third-best year for home sales. Buyers may not be able to buy as big a house as they want and sellers may have to settle for lower prices, but the market has not stalled.

“With consumer prices rising more quickly than they have in a decade, the Fed [Federal Reserve Bank] has repeatedly raised the interest rate it charges banks to borrow money. When lenders pass those increases along by raising the rates we pay for mortgages, credit cards, home equity and auto loans, we spend less making it more difficult for to raise prices.”

Although the 30-year fixed-rate mortgage rate has been steady at 6.9 percent over the past four weeks, it was only 6.7 percent in early June. “It’s more than the 5.78% we were paying this his time last year or the 5.28% we were paying in June 2003.”

These increases are not limited to 30-year fixed rates. “15-year loans averaged 6.49% after holding in the 6.3% range most of May and early June, up from 5.36% one year ago. 30-year jumbo loans (for more than $417,000) averaged 7.05%, after holding around 6.8% to 6.9% during the late spring, up from 6% this time last year. “

Introductory rates on adjustable-rate mortgages (ARMs) are rising even faster. “One year, averaged 6.13% last week, and 4.71% one year ago. Five years, averaged 6.55%, up from 5.35% one year ago.”

If you took out a 30-year, fixed rate loan for $150,000 today at the current rate of 6.89 percent, your monthly payment would be $987. Last July’s rate of 5.78 percent would have you making a monthly payment of $878. That is a difference of $109 per month.

“Mortgage rates could still increase a bit more by the end of the year because of inflation and the inflation-fighting Fed. It has increased interest rates 17 times, a quarter-point at a time, since June 2004.”

Mortgage rates continue to slowly rise.

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