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Monday, 7 July 2014

Jeff Adams Real Estate Seminar Report Mortgage rates increased by 5% over the past six months


Jeff Adams Real Estate Seminar Report Mortgage rates increased by 5% over the past six months Mortgage rates have risen to their high levels in 6 months, threatening to delay a housing turnaround by hopeless possible home buyers.

The normal rate on a 30-year, fixed-rate house loan climbed to 5.29 percent for the week ended Thursday, Freddie Mac reported. That's the highest since December and up from 4.91 percent a week earlier. In early and late April, the rate was at a record low: 4.78 percent.

There's a real risk interest rates could scale up beyond 6 percent or 6.5 percent, which can immediately shut down the housing recovery and weaken the national economy, says Bernard Baumohl, chief global economist at the Economic Group. 

Higher mortgage rates are already having an impact. Applications to buy a home or refinance a mortgage tumble 16 percent in the week ended May 29 compared with a week earlier, the Mortgage Bankers reported this week. Refinancing activity fell 24 percent. 

Refinancing share of mortgage activity dropped to 62.4 percent of totality applications from 69.3 percent the previous week. While the Federal Reserve is trying to hold down mortgage rates by buying mortgage-backed securities and reserves securities, other factors are driving up rates.

Mortgage rates have been pushed up by recent increases in yield on long-term Treasury securities, a standard for mortgage rates. If interest rates raise more, this could make a purchase too luxurious for some buyers. Weakened order would delay the reduction of a high list of unsold homes, which is considered essential for the market's recovery.

Some economists say the fundamental building blocks of a home recovery are already in place and that increasing interest rates will not derail the process. Could slow down refinancing, but the housing recovery is going to be one that takes time, and we will see setback on the way, says Michael Darda, chief economist at the National Association of Realtors Partners. "I don't think the housing market recovery is going to be derailed.

Lawrence Yun, chief economist at the National Association of Realtors, says increasing interest rates often have a short-term result of driving more buyers into the market. Those buyers rush to buy so they can lock in rates before they go still higher.