Mortgage Rates Spike: Trend or Isolated Incident

The average interest rate on a 30-year fixed rate mortgage jumped to its highest level since October 2011 in March 2012. The Virginia, Maryland and D.C. real estate market may or may not be affected long-term.

The good news: Fixed rates are still very low. Even this recent spike only increased the average rate to 4.29 percent. Respected financial observer,, noted the increase in its weekly national survey report. The 30-year fixed rate mortgage carried an average of 0.42 origination and/or discount points in the latest survey.

The average 15-year fixed rate loan continued to be a real estate owner or buyer “bargain,” at 3.48 percent. Adjustable mortgage rates, however, were typically higher in all categories. The average 5-year adjustable rate mortgage (ARM) moved up to 3.24 percent, while the 7-year ARM increased to 3.43 percent.

The question: Is this a trend or an abnormality? Only time will tell. However, the Fed has been buying bonds to provide economic stimulus. Their activity has caused bond investors to leave the market, which drives mortgage rates up. There is now the likelihood that the Fed will back off from their buying frenzy, bringing bond investors back into the market. This may–emphasize the “may”–influence a decline in mortgage interest rates.

Regardless of this recent rate increase, mortgage rates continue to be attractive to home buyers. With home prices in Virginia, Maryland, D.C. and around the U.S. remaining reasonable, the real estate market continues to improve. If mortgage rates remain below 6 percent, home buyers can enjoy many excellent purchase opportunities.

Once considered a super low interest rate, the 6 percent fixed rate has not been on the board since November 2008. Should the real estate market heat up and the U.S. economy strongly rebound, 6 percent could well become a mortgage bargain again. Even with this recent rate spike, home buyers can save over $250 per month (for identical mortgages) versus November 2008, when the mortgage rate was 6.33 percent.

Historically, home buyers try to “wait” until prices and/or mortgage interest rates hit “bottom.” This has proven to be a risky and disappointing strategy. Just as the recent spike surprised many observers, there is no proven method to indicate when rates touch “bottom.” Remember, most banking veterans also believed savings rates would “never” fall below 5 percent. We haven’t seen a 5 percent savings rate for some years.

As mortgage lenders become more aggressive and the fixed rate remains low, buyers in Virginia, Maryland and the District should take advantage of the stable home prices and the ability to get low cost mortgage loans. No one can predict whether this mortgage rate spike is a trend or an abnormality.

Why risk paying more interest for the financing you need to buy the home that you want? Buy now.

7 years ago by in Mortgage Rates | You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.
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