Mortgage rates: biggest spike in 4 years

[TexasLawyer]

Source: CNNMoney

Mortgage rates: biggest spike in 4 years

Rate on 30-year fixed mortgage gained 21 basis points in past week, to 6.74%,
highest level since July 2006.
By Rob Kelley, CNNMoney.com staff writer

June 14 2007: 11:01 AM EDT


NEW YORK (CNNMoney.com) -- Mortgage rates made their largest upward movement in nearly 4 years, and the 30-year fixed-rate reached its highest level since July 2006, Freddie Mac said Thursday.

The average rate on 30-year fixed-rate loans climbed to 6.74 percent for the week ending June 14, from 6.53 percent the previous week. That marked the biggest one-week increase since July 2003.

The 30-year rate stood at 6.15 percent on May 10th, just before it turned sharply up. Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects mortgage rates to top out near 7 percent by the end of the year.

<snip>


Read more: http://money.cnn.com/2007/06/14/real_estate/mortgage_rates/index.htm

[TexasLawyer]

1. More damage to "the bubble"

"Higher mortgage rates may weigh on the housing market's gradual recovery.
While demand appears to have stabilized, inventories of new homes remain high,
putting downward pressure on construction and home prices,"

--Freddie Mac Vice President

[David__77]

3. There is no "recovery" in the aggregate.

Nationally, there's no "recovery." Here in California, the bleeding is only just now really starting, and the fundamentals are in place for a lot more depreciation. It's not a housing bubble - it's a credit bubble.

[Dora]

2. We just locked at 6.75%.

We purchased in 2002 for 6.5%, I believe.

[Extend a Hand]

4. for some perspective...

I bought my first house in 1987 with an FHA loan at 9%.

In 1994, I paid 1 pt to get a 7% 30 year loan.



I

[Jeff In Milwaukee]

5. Just to split the uprights...

I paid 8% in 1992.

[ananda]

6. In 1979, when Carter was prez..

.. I bought a house at 10%.

However, houses were a lot cheaper then so I could
afford it.

Now I couldn't afford a house at 5%.. so I rent.

Sue

[TexasLawyer]

7. corresponds with the melt-down of the bond market

US bond prices dive as global rate, inflation fears rise
Posted: 14 June 2007

NEW YORK -


<snip>

The decline in US bond prices has sent 10-year US Treasury yields, which move in an opposite direction to prices, to their highest peaks in over five years this week.

The 10-year bond yield surged above five percent for the first time since early 2002 and rose as high as 5.32 percent this week, reflecting a sharp drop in the value of the obligations. "The bond market has suffered a meltdown because of fear. Fear of inflation. Fear of global increases in rates," Kevin Giddis, a managing director at Morgan Keegan & Company, told investors in a note.

The bond market trend suggests borrowing costs are headed higher, which could affect American home owners with mortgages, the boom in private equity buyouts using borrowed cash and virtually any other lending. Bond yields reflect the financial market's outlook for interest rates and inflation, and many analysts believe the global economy is sailing into a higher interest rate and inflationary period.

Some analysts say the so-called bull market in bonds, which began around 1981 and was fuelled by declining inflation worldwide, may be ending.

<snip>

http://www.channelnewsasia.com/stories/afp_world_business/view/282119/1/.html

[kineneb]

8. gotta wonder why such info only found in Asian sources

I read Asia Times online for their economic observations. I have not seen comparable info in US news anywhere.

[Yavin4]

9. It does not "Correspond". It Directly CORRELATES

"Some market-watchers believe that Asian powerhouse China is cutting back on its US bond purchases, which are traditionally considered a safe haven investment, as it seeks to diversify its vast financial holdings. "

Here's how it works. China buys our long term debt and thereby lowers long term interest rates. Couple that with Greenspan's lowering short term rates to 1%, and you get incredibly cheap debt which lead to the housing boom. Cheap debt = More Qualified Buyers = Higher Home Prices.

Today, as the quote above states, China is not buying our debt as much. Thus, rates have to rise in order to attract more buyers. As these long term rates go up, ALL other long term rates go up. Now, debt is no longer cheap. More Expensive Debt = Less Qualified Buyers = Falling Home Prices.

[demnan]

10. Glad I traded my 2004 ARM

for a 2005 Fixed Rate Mortgage at 5 1/2%

That saved me when I lost my bubble IT job for my safe Association one and my income plunged almost 30K

The little condo doesn't seem like such a mistake afterall.

[TexasLawyer]

11. I did much the same thing

Traded my 30-year ARM in 2004 for a 15-year note at 5% fixed interest.

I had read too many Paul Krugman articles warning that borrowing costs were eventually going to go WAY up given the tax and spending policies of the Bushies.

Thank you, Professor Krugman! My favorite dismal scientist!