The benchmark 30-year fixed rate averaged 3.91 percent for the week, up from last week when it averaged 3.90 percent.
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With the job market now considered essentially recovered from the Great Recession, many economists say it’s time to start edging toward normal rates.
All eyes, however, were on the FOMC’s decision.
Even when we see higher interest rates, responsible borrowers still will probably have easy access to loans and rock-bottom rates, said Louis Navellier, chairman of money management firm Navellier & Associates in Reno. But, for banks, what the Fed projects about where rates will be at the end of next year may be far more important.
Agarwal added that a modest increase in long-term interest rates will not materially affect the credit performance of legacy outstanding RMBS.
The Mortgage Bankers Association reports a 7 percent drop in loan application volume from the previous week. Bond yields soared, which sent the 30-year fixed-rate average 22 basis points higher in one week.
“Although lower prepayments will slow the buildup of credit enhancement and extend the average lives of the bonds, excess spread, credit enhancement and fewer new defaults owing to an improving economy will offset most of the negative impact”, Agarwal says.
15-year fixed rates averaged 3.11% with an average 0.6 point.
But if rates keep rising, so will the consequences.
“Prior commentaries about low inflation being transitory were apparently not a motivation for today’s inaction”.
The health of the jobs market, however, was seemingly not the Fed’s biggest concern.
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“In aggregate I think the near-term impact is negligible if not positive”. But “those with good credit or who shop around, will always get attractive promotional offers”, McBride said.
A new survey conducted this week by Trulia suggests that homebuyers aren’t concerned about a rise in rates.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
Nearly two-thirds of the consumers polled said the maximum price they would pay for their first or next home was $250,000. Soon, there was nothing left to “taper” and the artificial cap on interest rates was gone. With 20 percent down, the rate increase could mean some buyers would qualify for less on a mortgage, but it would not turn those buyers away. “Prospective homebuyers are most worried about being able to get a mortgage and if they could find a home that they would like”, Hepp says.
So many consumers are asking themselves a much more fundamental question: Why do interest rates matter, and what would a rate increase mean for the typical family?
Part of the reason the Fed is considering a rate increase is that the economy is on the mend and unemployment rates are at a seven-year low.
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But if it’s followed by other increases, households will begin to feel a squeeze as credit card rates and other adjustable-rate loans tick upward.
