FHA Mortgage Guide

Two days ago it was written here that interest rates were sure to rise. This view did not come from the use of either a crystal ball or a soothsayer. Instead, it was based on the movement of 10-year Treasury notes and, yes, they surely moved.

The weekly report from Freddie Mac issued yesterday shows a huge one-week increase in fixed mortgage rates, from 6.53% a week ago to 6.74%, both with .4 points.

An increase of .21 percent (21 basis points) translates into an additional annual cost of $21 per $10,000 borrowed. For a $200,000 mortgage that’s an extra $420 or so to your favorite lender in the next year.

Not much you say?

“Mortgage rates moved sharply upward this week, with rates on 30-year fixed-rate mortgages jumping more than 20 basis points, the largest upward movement in over three years,” said Frank Nothaft, Freddie Mac vice president and chief economist. “These moves parallel rising yields on Treasury securities, as concerns about inflation pressures and continuing strength of consumer and business spending have dimmed hopes for an interest rate cut.

“Higher mortgage rates may weigh on the housing market’s gradual recovery. While demand appears to have stabilized, inventories of new homes remain high, putting downward pressure on construction and home prices.”

“May weigh?” C’mon. Higher rates mean less borrowing for a given amount of income. That means either fewer buyers, reduced prices or both.

It doesn’t make sense to make big mortgage plans based a weekly interest rate change. But if this trend continues we will soon hit 7 percent and more, not much by historic mortgage standards but enough to worry those with huge ARMs and growing monthly payments – and those who thought they could afford a given loan amount.

Check out these FHA resources for more information

This entry was posted on Friday, June 15th, 2007 at 1:41 am and is filed under FHA. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.