Traverse City Record-Eagle

Business

June 28, 2013

Mortgage rates jump

WASHINGTON (AP) — The average U.S. rate on a 30-year fixed mortgage surged this week to 4.46 percent, the highest in two years.

The increase from a 3.93 percent average last week was the largest one-week jump in 26 years, according to a report Thursday from mortgage buyer Freddie Mac. And it shows the Federal Reserve’s hints that it might slow its bond purchases this year are already affecting consumers.

In the short run, a spike in rates could prompt more people to buy homes, giving the housing recovery an added boost. That’s because would-be buyers would want to lock in the rates before they rise further.

But if rates continue to climb, eventually some buyers might feel priced out. That could slow homes sales at a crucial time.

Interest rates have jumped after Fed Chairman Ben Bernanke said on June 19 that the Fed could slow its bond purchases later this year if the economy strengthens. Since Bernanke’s comments, the yield on the 10-year Treasury note has risen to a two-year high. Mortgage rates tend to track the yield on the Treasury note.

Freddie Mac also said the average on the 15-year mortgage rose to 3.50 percent from 3.04 percent last week. That’s the highest since August 2011.

Mortgage rates remain low by historical standards. Still, the impact on buyers’ wallets in just the past two months is striking.

A buyer who locked in a 3.35 percent rate in early May on a $200,000 mortgage will pay $881 a month, according to Bankrate.com. Another buyer who gets a 4.46 percent rate this week on a mortgage of the same amount will pay $1,008 a month.

The difference: $127 more a month, or $45,720 over the lifetime of the loan. The figures don’t include taxes, insurance or initial down payments.

Anthony Geraci, a Cleveland real estate broker-owner, is already seeing more sales activity in his market because of the increase in rates.

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