Homebuyers, beware: Mortgage rates are rising
Concerns about the Federal Reserve possibly slowing its stimulus efforts have helped push home loans to their highest level in a year.
By Aimee Picchi 6 hours ago
So with all the buzz about housing's revival, why are mortgage
rates rising? Lenders are boosting them because of concern that the Federal
Reserve could decide to slow its stimulus policies, which have kept interest
rates near record lows.
"Mortgage rates increased to their highest level
in a year," MBA research executive Mike Fratantoni said in the group's
newsletter. "Rates rose in response to stronger economic data and an increasing
chance that the (Federal Reserve) may soon begin to taper their asset
purchases."
The average contract interest rate for 30-year fixed-rate terms
rose to 3.9%. While that's still well below historic norms, it's the highest
rate since May 2012. And it has led to a drop in home-loan and refinancing
applications, the MBA notes.
The Fed currently purchases about $85 billion a month in
mortgage-backed bonds, Reuters says. That has kept rates much lower than they
would have been otherwise, and it has helped spur demand in the housing market
by making borrowing more affordable. It also lures current owners into
refinancing at lower rates.
If higher rates put a damper on
homebuyers' newfound enthusiasm, that could eventually mean slower sales for
homebuilders such as D.R. Horton (DHI +0.80%) and Toll
Brothers (TOL -0.20%). As reported Wednesday, the shares
of homebuilders have posted big gains this year.
Follow Aimee Picchi on Twitter at @aimeepicchi.
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