Interest Rates Approaching Two Year High
By Paul Esajian on September 6, 2013
Well, it was bound to happen sooner or later. What many mortgage professionals predicted months ago is only now starting to come to fruition. After a summer of slowly rising interest rates, the thirty year fixed mortgage has now risen to a two-year high at just under five percent. With positive economic data being released today, it is not unrealistic that rates could climb over that five percent plateau. While this may not impact you if you are a cash buyer, it will have a direct impact when it comes time to sell your property.
As a very general rule of thumb, the better the economy is doing, the higher the interest rates. Lenders feel they can get a safer return on their money in times of economic growth. Corporate investors look at the spread between the 10 year Treasury bond and mortgage interest rates as a guide. After years of interest under four percent, rates are now starting to return to somewhat normal levels. To put it in perspective, in 2001, the average interest rate was approaching 10 percent and nobody was blinking an eye. Even in the height of the market ,between 2005-2008, interest rates never got below 5.75 percent. Rates may be rising, but they are still way below historical levels.
If the real estate market continues to rebound, we can expect to see rates climb even higher. If buyers weren’t enticed by record low rates and bottom barrel home prices, there is not much reason to keep rates low. With the economy seemingly only getting better, interest rates may reach six percent by the end of the year or beginning of next year. If this plays a huge role in homebuyer applications, it will be a key factor in sustaining the real estate recovery. Interest rates are not going to go down any time soon. The only question now seems to be just how high they will go.