From the LA Times:
Mortgage rates have risen half a percentage point since setting record lows last fall, and many economists expect them to continue rising for the foreseeable future.
The increase, a reaction to the improving economy and housing markets, could fuel already hot housing markets as potential home buyers look to seal a deal before rates rise any further.
Tuesday’s good economic news about the housing market recovery — with home prices surging at the fastest pace in about seven years — was tempered by a jump in mortgage rates, with averages reaching a 12-month high, according to the Mortgage Bankers Association.
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.”
Worries the Federal Reserve may begin to slow its stimulus efforts sent U.S. mortgage rates last week to their highest level in a year, a surge that could be a headwind to the nascent housing recovery should they march much higher.
At the same time, the jump in rates appears to have spurred some prospective buyers to lock in cheaper prices while they can, according to data from the Mortgage Bankers Association released on Wednesday.
“People who were on the fence, they tend to get a sense of urgency as they see interest rates rise,” said Bob Walters, chief economist at Quicken Loans. Rates averaged between 5 and 6 percent over the last decade, Walters said.