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December 7th, 2010

Worried about rising mortgage rates? Perspective is important



Rising rates Mortgage rates have been ticking upwards over the last few weeks. Since mid-October, mortgage rates have risen about thirty basis points, a small take-back after a near year-long decline:

Last week, the average rate for 30-year fixed-rate mortgages moved eight basis points higher (.08%), ending HSH.com’s national survey at 4.86%, its highest value since early August.

The most immediate example of borrower reaction to rising rates has been the fall off in refinance and purchase applications. Even without a one-time, dramatic increase in mortgage rates, borrowers have quickly moved to the sidelines, content to see where mortgage rates will head next:

With the increase in rates, it’s little surprise that applications for new mortgages have dropped sharply, particularly for refinancing. Given what seems to be the particularly strong interest rate sensitivity of this refinancing boomlet, refinancing activity will probably grind to a halt absent a new decline in rates.

Perspective is always important, especially when you factor in all the considerations that go into a home purchase:

Home purchases rely far less on rock bottom interest rates and far more on economic improvement and especially income and job growth. Those who wish for lower rates are, in a way, wishing economic misfortune on others. At this stage of the recovery, we should all be cheering even mildly better economic news, even if it does engender somewhat higher rates. Yes, fewer household balance sheets will be improved by refinancing, it’s true, but if that comes at the expense of more folks getting jobs, spending money and buying homes sooner rather than later, so be it.

Furthermore, perspective is also important when you examine the recent rate increases:

Sure, rates have increased as of late, but rates have been falling for about a year. Also, the 30-basis-point increase since mid-October is only “a small take-back after a near year-long decline.”

2 Responses to “Worried about rising mortgage rates? Perspective is important”

  1. Tweets that mention Worried about rising mortgage rates? Perspective is important | HSH Financial News Blog -- Topsy.com Says: December 7th, 2010 at 8:20 pm

    […] This post was mentioned on Twitter by HSH Associates, Mortgage News. Mortgage News said: [HSH] Worried about rising mortgage rates? Perspective is important http://ow.ly/1alDWu […]

  2. myloanladycheri (Cheri Hanagan) Says: December 13th, 2010 at 4:59 pm

    rising rates? Perspective – http://blog.hsh.com/index.php/2010/12/worried-about-rising-mortgage-rates-perspective-is-important/

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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