Mortgage rates have increased above 4 percent for the first time in three months. The average rate on a thirty year fixed mortgage went above the 4 percent mark for the first time ever since late October 2011. However, the increase in mortgage rates is not expected to run off new signs of an improving United States housing market. According to Freddie Mac, a mortgage giant, a 4.08 percent jump was observed in the average rate on 30 year loans this week, which is an increase from 3.88 percent fourteen days back.
Mortgage rates have been near record low values for many months now but they are now increasing with raised yields on 10 year treasury notes and a strengthening United States economy. Moreover, mortgage rates may increase more than their current value. Mortgage giant Freddie Mac expects the rate on 30 year fixed rate loans to reach almost 4.25 percent or 4.5 percent by the end of 2012.
If seen historically, higher mortgage rates are not good for the housing market, which has already been suffering and hasn’t been able to gain momentum since the last time it collapsed, after the recession few years back. However, the impact of rising mortgage rates will be cooled off by super low rates. Even with jumps in mortgage rates, they are still very low, according to Frank Nothaft, chief economist of Freddie Mac. Mortgage rates averaged to about 7.1 percent from 1990 till 2010.
Moreover, according to Capital Economics, home prices all over the nation are 34 percent lower than their 2006 value and for mortgage affordability to come back to levels as it was seen on in between 1990 to 2008, 30 year mortgage rates will have to increase to 9 percent. Paul Dales of Capital Economics said that as home prices are declining in a lot of markets, the newest mortgage rate jumps will not put brakes on the U.S economic recovery process.