ShareThis Page
Super-low mortgage rates might be ending |

Super-low mortgage rates might be ending

The Associated Press
| Friday, February 11, 2011 12:00 a.m

NEW YORK — The days of the absurdly low mortgage rate are over.

The average rate for a 30-year home loan rose above 5 percent this week for the first time since last April, just as Americans are feeling more secure in their jobs and confident about the economy, and just before the big spring home-buying rush.

Freddie Mac said Thursday that the average rate was 5.05 percent, almost a full percentage point higher than in November, when it hit a 40-year low.

Economic signals suggest the recovery is gaining momentum. New claims for jobless benefits came in this week at the lowest in three years, and the unemployment rate has fallen nearly a full percentage point in two months. Americans are spending more and saving less.

The exception is the beleaguered housing market. Record foreclosures have forced home prices down, and 2010 was the worst year for sales in more than a decade. About the only good news was that qualified buyers could get the deal of a lifetime from their lenders, if they had the means — and the stomach — for the market.

Now rates are rising, and analysts expect that will continue through the end of the year, to about 5.5 percent. The next few months are the busiest for the housing market — about 1 in 3 home sales happens in the spring.

“It doesn’t help,” said Greg McBride, a senior financial analyst with “Any increase in mortgage rates takes away buying power and dilutes the incentive to refinance.”

Rates have been rising since the fall, mostly because of fears that higher inflation is coming. Investors have been demanding higher yields on Treasury bonds ever since the Federal Reserve announced its program to pump up the economy by spending $600 billion to buy government debt. Mortgage rates tend to track the yield on the 10-year Treasury note.

Mortgage rates are still extremely low by historical standards. Anyone who bought a house 30 years ago might remember paying 18 percent on the loan.

And many analysts say low lending rates are less likely to persuade people to buy than, say, reasonable home prices or a steady job market.

“You’ll see some effect on demand, but it’s really how secure people are in their jobs and how much money they feel they have relative to their homes,” said Cristian deRitis, an economist specializing in housing for Moody’s Analytics.

“Many of those people just won’t buy a house,” Wells Fargo senior economist Mark Vitner said. “They’ll hold off.”

Home prices are expected to fall at least 5 percent more this year. Because of the feeling that the home isn’t the fail-safe investment it used to be, renting is more attractive. Especially when some analysts say it could be years before prices return to their prerecession peak.

That may be contributing to the fact that, despite record inventory levels of affordable homes in nearly half of U.S. cities, mortgage applications continue their downward slide as buyers remain on the sidelines.

Categories: News
TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.