If you were waiting for rates to go lower before purchasing a home or refinancing, it looks like you may have missed the mark. For the fourth straight week, mortgage rates moved up and are now at a six month high. 30 year fixed rates this week are averaging around 4.61%, up from last week’s rate of 4.46% and 15 year fixed rates rose to 3.96% up from last week’s rate of 3.81%.
Why the sudden rise? There are a few items to look at. First it appears that Obama and congress are compromising and additional tax cuts and extended unemployment are expected in 2011. While these moves are expected to boost the economy, at the same they will increase the ever growing deficit. This news seems to have sent the selling of treasury bonds into a tailspin. As bonds are sold, the mortgage interest rates rise.
The surge most likely will be another thorn in the side of an already week and struggling housing market. While short term gains may be made as those on the brink of buying or refinancing jump in before rates go even higher, more than likely refinancing and home sales will slow.
According to an article in the Wall Street Journal, homes are the forefront of wealth in the country and home ownership helps to sustain other sectors like construction and finance. With rates rising these sectors could also be affected.
Refinancing and home sales have been disappointedly low and foreclosures have been on the rise even as consumer spending is up from last year. This is not a time for housing to get hit further.
“Housing is in the process of a double dip, and this rise in interest rates is certainly another nail in the coffin,” said Sung Won Sohn, an economist at California State University, Channel Islands.
In looking ahead, rates will most likely take another hike next week, as interest rates tend to lag behind bond sales which rose again this week. As a result it is anticipated that home sales and refinances will continue to remain low and possibly drop even more as we approach the New Year.