The 3 percent mortgage rate is now a thing of the past
The mortgage rates have started to climb up once again but still are on the moderate side. As a result, the costs of home buying is on the rise too. In fact, home sales is on the climb too. Therefore, you will have to say no to the historically low rates as of now. The mortgage rates as per reports have jumped to more than 4% in a year and that too for the first time. Therefore, it is high time that you start shopping for mortgage, in order to get the best low rate possible.
The mortgage rate on the rise
In fact, reports show that in the first week of June the interest rate reached to 4.15%. As per the reports by Mortgage Bankers Association, five weeks prior to this the rate was 3.59%. This rise signifies the 15% gain with regards to the borrowing cost . This can amount to around $50 with regards to the monthly payment on an average with that of a $192,800 home.
Although the buyers are not happy with the ongoing increase of the interest rate, most of the homebuyers and homeowners have taken it in good course till date. This gradual but sharp increase in the interest rate of the mortgage has resulted in a sudden drop of the refinancing activity. Although, a slight rise in the rate and the price of the homes is said to have contributed to the betterment of the mortgage market, there can be a serious drawback too. If the interest rate goes on a string rise like this, it actually is going to negatively affect the improvement of the housing market in the long run.
There has been a double digit percentage rise through last year following this year, but just because the mortgage rates were low, the impact was not felt too easily by the homebuyers or the owners who were trying to refinance.
As per the rule of thumb, one-percent-point boost in the rate of a mortgage results in an almost 10% increase in the cost of the homes for the buyers. So, a greater increase in the mortgage interest rate is going to have negative effect on the economy in the broader sense too. The economy has just started to bound back to more or less normal. Another slight setback too is not going to be good for the economy.
In fact, there is high concern about this increase of the mortgage rate in the stock market. Although majority of the home builders apparently are looking unaffected by the sudden change, investors have let down Dow Jones U.S. Home Construction Index to 7.6%. Furthermore, analysis shows that the confidence of the builders was hit the most in 7 years. This index is seen to have risen to 52 going up from 44 which was seen last in the month of May 2013.
However, this too cannot be denied that as of now the rates still are cheap and affordable enough for most of the home buyers.