The Real Story …
News and commentary about the real estate market and related topics.
Dave Parrish, ABR, CRSA, CSP, GRI, ePRO, Realtor
Are Mortgage Rates Going Up or Down?
Mortgage interest rates do not generally fluctuate wildly, but small changes can make a big difference in the overall cost of a loan. You can get a general feel for what mortgage interest rates are doing by studying a history of the direction of interest rates. These charts can be found on websites like BankRate.com or Bloomberg.com
For the past several years we have experienced declining interest rates. However, it appears that after seeing historically low rates (matching those of the early 50’s) an upward trend in rates is taking place. Over the course of the last four weeks rate rates have trended up with a slight down tick the week just ended (6/21). Currently rates for a 30 year fixed mortgage are running from 5.25 to 5.75%.
All of the mortgage consultants that I have discussed rates with have indicated that they anticipate the prevailing rate by end of year is expected to be over 6%, which is up from a low of 4.5% experienced earlier this year. While, longer range forecast are for rates of as much as 8% by the end of 2010. Now make no mistake even 8% is a good rate when looking at rates of the 70’s … but the mortgage rate sale is coming to a close!
Average Interest Rates for 30 Year Fixed Rate Mortgages
As mortgage interest rates rise, you’ll be able to afford less house for your money, so if rates are expected to rise and you’re in the market for a house, you may want to consider stepping up your house-hunting efforts.
Mortgage interest rates are definitely increasing for a certain group of people: those folks who have damaged credit and who have foreclosures or other loan defaults on their credit reports. The sub-prime mortgage crisis has made most financial institutions wary of lending money to people with low credit scores (currently below 650) because these folks are considered to be high credit risks.
Traditionally, people who are considered to be high credit risks receive higher interest rates for any credit product. If your credit rating is steadily decreasing, you can be assured that the interest rates of any mortgage loan available to you will also steadily increase as a direct result.
On the other hand, interest rates tend to decline for people with great credit (Credit Scores 720 and higher). For this reason, a person who fastidiously repairs his or her credit and achieves a high credit score will find that the mortgage loan interest rates available get lower and lower. The more attractive an applicant can become to a lender, the more likely the lender will offer low interest rates.
