Don’t Lose Too Much Sleep Over Rising Mortgage Rates
By: Alison Paoli, Zillow PR Specialist | June 9, 2009
In the past few weeks, we have seen mortgage rates rise above 5.5% for a 30-year fixed loan from the sub-5.0% levels we have enjoyed over the past few months. And though it may seem like a big jump over a short period of time, I thought it was worth a glance back in history to see what rates once were to remind us that they are still historically low and that we are still getting a better deal than home buyers did back in the early 80’s.
The real-time rate as reported on Zillow Mortgage Marketplace at this very moment is 5.65%. Yes, it is higher than rates we have seen in past few months, but considerably lower than rates over the past 30-40 years.
Take a look at the image below. The graph ends in October of 2008 but even then, at one of its lowest points, it was at 6.0%.
So the bottom line is, if you are planning to buy or refinance in the near future, you can bet your bottom dollar that you will be getting a historically low interest rate.
To find out why interest rates have jumped up in the past few weeks take a look at Tom Vanderwall’s blog post on Mortgages Unzipped titled “What Happened, What Does it Mean, and Where Do We Go From Here?”
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Comments
19 Comments so far
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Pete on June 9, 2009 6:14 pm
“…we are still getting a better deal than home buyers did back in the early 80’s.”
Except that in some markets (such as northern New Jersey, where my wife and I are looking), home prices are still stubbornly close to peak, sustained at that level by low mortgage rates. If mortgage rates rise AND those asking prices stay high, then I’m sorry, but there isn’t any truth to the statement that we’re “getting a better deal than home buyers back in the early 80’s.”
Clinton, UT on June 9, 2009 6:26 pm
Good to hear some reassuring commentary about this sensitive issue. I’ve got a lot of worried clients and this is excellent food for thought.
Acre on June 10, 2009 8:23 am
I don’t think there is much satisfaction in rates being better than 20 years ago. Face it, people aren’t refinancing out of loans from 1983. The fact is a lot of people can’t take advantage of the low rates because they are so underwater due to falling home values. The government has helped somewhat with the recent Financial Stability Plan, but it is taking lenders time to process these requests. It is scary for people to see rates on the rise while they are in a holding pattern waiting to take advantage of lower rates. As rates tick upward people are losing out on the savings that people hoped to gain from the refinancing with the FSP.
Cedar Rapids Real Estate on June 11, 2009 6:33 am
These indeed are quirky times and yes, people will procrastinate from making a purchase or refi when rates tick up even if rates are still good.
People always dwell on what they could have had so if rates were slightly lower than they feel like they missed the boat.
Pete on June 11, 2009 11:09 am
But is it “procrastination” if one has a suspicion that the low rates are unsustainable over the long run, and that once rates rise, prices will fall a great deal further? I don’t think so. I’d call it prudence.
Sandy @ SA Commercial Property on June 11, 2009 11:07 pm
Very true statements made there, and yes “procrastination” is the biggest problem for most people.
Angela on June 12, 2009 6:54 am
So as someone who is shopping, I have to admit…I’m kind of dragging my feet here holding out hope that the rates will drop again.
Also, the re-proposal of the $15K stimulus is not helping matters.
I’m just hoping I don’t miss the boat entirely, only to get a 6.5% interest AND not have closed by 11/30/2009 to benefit from the tax credit. That would totally break my heart.
I feel like I’m in some kind of really trippy Vegas nightmare. Everything is a gamble right now.
What to do, what to do???
BigDragon on June 12, 2009 8:08 am
Rates are better than they were in the 80’s, but prices surely are not. Buyers don’t want to hear that we’re getting a great deal when their prospective monthly payments just significantly jumped up. I don’t care that rates are lower than they were in the 80’s nor do I care that prices are down from peak bubble levels. Buyers are concerned about what they can comfortably afford in terms of monthly payments. The rate increase will have a direct effect on those monthly payments which is bad for buyers, bad for real estate, and will stall the attempts at recovery unless action is taken to reduce rates or mitigate their impact.
Nike Lebron VI on June 12, 2009 8:21 am
People always dwell on what they could have had so if rates were slightly lower than they feel like they missed the boat.
Amazed on June 12, 2009 10:06 am
More terrible advice from another uneducated cheerleader. Explain to us Alison how the fact that the 10yr has jumped over 100bps and how that impacts the price of a house, and purchasing power.
I noticed you went back 20 years in rates,but not 20 years in average prices and what happens to real estate when rates rise.What do your charts prove? Nothing. Did you forget what inflation was back then or the price of real estate to rent, income, or the fact that they didn’t have all of the exotic and toxic loans back then? How about the fact you needed 20% down and had to document your income and such?
Did you even address WHY rates are rising and what that may mean for potential buyers?
Keep advising people not to worry. No big worry that unless you locked in before the spike in rates, you most likely are not going to close, as the numbers don’t line up now. No big worry that the resets and recasts that will take place are going to force more foreclosures and further depress the market. No big worry that all of the government stimulus programs for saving the housing market were based on sub 5% mortgage rates. No big worry that the jump in rates and the LTV’s are now making it extremely unlikely anyone can refi.
Sure. Nothing to lose sleep over. And to think you are giving advice.
Pete on June 13, 2009 6:25 pm
Overall price levels trump interest rates in importance every time. If you believe prices still have significant room to fall in your area, then this isn’t a good time to buy–not at 5.5%, not at 4.5%. And as I tried to say before, and a few commenters above have previously said, when interest rates eventually rise to more historically-normal levels, you can pretty much count on price drops.
Loan Modification on July 9, 2009 2:48 am
thankfully, interest rates are finally decreasing!
Bitki derman on July 24, 2009 1:10 pm
Did you even address WHY rates are rising and what that may mean for potential buyers?
oestro krem on July 24, 2009 1:11 pm
Keep advising people not to worry. No big worry that unless you locked in before the spike in rates, you most likely are not going to close, as the numbers don’t line up now. No big worry that the resets and recasts that will take place are going to force more foreclosures and further depress the market.
acı cehre on July 24, 2009 1:11 pm
The rate increase will have a direct effect on those monthly payments which is bad for buyers, bad for real estate, and will stall the attempts at recovery unless action is taken to reduce rates or mitigate their impact.
online alışveriş on July 24, 2009 1:12 pm
thankfully, interest rates are finally decreasing!
acı cehre on July 24, 2009 1:13 pm
No big worry that the resets and recasts that will take place are going to
çatlak kremi on July 24, 2009 1:14 pm
The rate increase will have a direct effect on those monthly payments which the attempts at recovery unless action is taken to reduce rates or mitigate their impact.
100% Mortgage on August 5, 2009 4:44 am
We desperately need people to take advantage of this and boost the finance industry.