Low mortgage rates have been the one bright spot in an otherwise devastated housing market, but now they're on the rise.
Historically rates are still very low, but experts say they could continue to creep up.
The average interest rate on a 30-year, fixed rate mortgage jumped to 6.6% late Tuesday from 6.06% the Tuesday before, according to Keith Gumbinger of HSH Associates, a publisher of mortgage information.
A borrower with a $200,000 mortgage would pay about $1,207 a month at 6.06%, and $70 more at 6.6%.
Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.
That's quite a bit higher than rates have been, but it's no disaster.
Gumbinger blames the rate increase on the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.
"Who even has the cash to buy them all?" said Gumbinger. "The Treasury has to offer higher interest rates to sell."
Mortgage rates tend to move in conjunction with Treasurys. ...
So, with Treasury yields on the rise, mortgage rates should continue to be a more expensive for the next few months, he said.
Thursday, October 16, 2008
Mortgage rates predicted to rise to 7%