Current Weather
The Spy FM

Housing Market Watchers Edgy As Mortgage Rates Keep Climbing

Filed by KOSU News in US News.
June 14, 2013

Mortgage rates have seen a relatively sharp rise this month. The average 30-year fixed-rate loan hit 4 percent earlier in June — a big jump from the record lows of recent years. Some investors are now concerned that the housing recovery could be stifled if rates continue to rise quickly.

The Federal Reserve has two main missions: to maximize employment and minimize inflation. Right now, there are few, if any, signs that prices for goods are spiking, and the job market is still crawling out of its long, deep slump.

The central bank has tried to protect the nascent recovery by keeping interest rates low. One of the ways it does this is by buying massive amounts of Treasury bonds and mortgage-backed securities. The Fed has also reminded investors that it will continue taking such steps until the jobless rate declines to 6.5 percent.

But investors aren’t heeding the Fed’s assurances that, when the time comes, it will wind down its stimulus very slowly.

“I think we, along with many other forecasters, had anticipated that rates were going to rise this year,” says Michael Fratantoni, a vice president of research for the Mortgage Bankers Association. “But [we] had anticipated a gentle floating up of rates as opposed to a sudden jump like we’ve seen.”

Fratantoni says that last week, refinancing activity declined 36 percent from the previous month, largely because most eligible homeowners already locked in record-low rates near 3.5 percent.

“Once rates are up close to 4 percent, as they are now, you have a very large number of people that just have no incentive to refinance anymore,” Fratantoni says.

Guy Cecala, CEO of the trade publication Inside Mortgage Finance, says 4 percent is still well below the historic norms, and he doesn’t expect that rate would have any negative effect on the housing market.

Cecala says investors buy into safe havens like Treasury bonds when they fear the stock market or don’t trust that the economy is stable. So the fact that demand for Treasuries is down and that interest rates are rising is a sign of greater investor confidence, he says.

“It’s a very positive sign. If the price we pay for an improving economy and everything is 4 percent interest rates long term, so be it. That would be a great outcome,” he says.

The Fed’s Open Market Committee is scheduled to meet to discuss policy next week. [Copyright 2013 NPR]

Leave a Reply

11PM to 5AM The Spy

The Spy

An eclectic mix of the Spy's library of more than 10,000 songs curated by Ferris O'Brien.

Listen Live Now!

5AM to 6AM The Splendid Table

The Splendid Table

Hosted by award-winning Lynne Rossetto Kasper, The Splendid Table is a culinary, culture and lifestyle program that celebrates food and its ability to touch the lives and feed the souls of everyone.

View the program guide!

6AM to 7AM Travel with Rick Steves

Travel with Rick Steves

"Travel with Rick Steves" is a fun, hour-long, and practical talk show with guest experts and calls and questions from travelers. This weekly program is a lively conversation between travelers and the experts as we learn to explore our world smartly, smoothly, and thoughtfully.

View the program guide!

Upcoming Events in your area (Submit your event today!)

Streaming audio and podcasts

Stream KOSU on your smartphone

Phone Streaming

SmartPhone listening options on this page are intended for many iPhones, Blackberries, etc. with low-cost software applications available to listen to our full-time web streams, both News on KOSU-1 and Classical on KOSU-2.

Learn more about our complete range of streaming services

We're perfecting the patient experience - Stillwater Medical Center