Mortgage Rates Post Biggest Increase in 21 Years - good for Main Street, eh?

[Cecropia]

Bankrate: Mortgage Rates Post Biggest Increase in 21 Years

NEW YORK, Oct 16, 2008 /PRNewswire-FirstCall via COMTEX/ -- Mortgage rates soared this week, with the average 30-year fixed mortgage rate jumping more than one-half percentage point to 6.74 percent. According to Bankrate.com's weekly national survey, the average 30-year fixed mortgage has an average of 0.42 discount and origination points.

The average 15-year fixed rate mortgage climbed to 6.40 percent, while the average jumbo 30-year fixed rate rose to 7.87 percent. Adjustable mortgage rates were sharply higher also, with the average 1-year ARM now 6.32 percent and the average 5/1 ARM skyrocketing to 6.61 percent.

Mortgage rates posted the biggest one week increase since April 1987, soaring as credit fears reached a fever pitch. In addition, yields on benchmark 10-year Treasury notes climbed as investors worried about the additional supply of government debt resulting from billions of dollars in various rescue packages. Mortgage rates move in relation to Treasury yields, but at a spread -- or markup -- over the risk-free government debt. The intensifying credit crunch and the government guarantees on bank debt drove up the spread between mortgage bonds and benchmark Treasuries. But since Treasury yields climbed from 3.5 percent to over 4 percent over the previous week, mortgage borrowers had two factors working against them.

This sharp increase in mortgage rates over the past week has a direct impact on a homebuyer's affordability. At last week's rate of 6.20 percent, a $200,000 loan carried a monthly payment of $1,224.94. This week, with the average rate at 6.74 percent, the monthly payment on a $200,000 loan is $1,295.87.

                                SURVEY RESULTS
     30-year fixed: 6.74% -- up from 6.20% last week (avg. points: 0.42)
     15-year fixed: 6.40% -- up from 5.95% last week (avg. points: 0.60)
        5/1 ARM: 6.61% -- up from 6.21% last week (avg. points: 0.40)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to http://www.bankrate.com/mortgagerates

 

See the bold above?  This is why the bailout bill(s) and other new spending does not help Main Street.  If borrowers even qualify (which is getting increasingly harder) they are faced with these higher interest rates on their mortgage-to-be, which means they can afford less house or they may put off buying "until rates come down"... which means that real estate is not going to be moving any faster, which means less people are going to sell, which probably means more foreclosures.  And when the people with adjustable rate mortgages get to the point where their mortgages readjust, they're going to be in a world of pain.

[MotherofIreland]

Oct. 16, 2008 at 8:22 PM

Ugh! Good thing I bought my house in January through WHEDA!

But, yeah, this really sucks. It's a vicious cycle. Associated Bank is making damn sure that it's floor rate is 5% and NO LESS. (I work in Commercial Banking).

[MotherofIreland]

Oct. 16, 2008 at 8:23 PM

Oh, I voted popular. People need to read this shit! Keep up the good (but depressing) work!!

[Waxing_Lyrical]

Oct. 27, 2008 at 7:58 PM

...  and potentially this is just the start.