Patricia Cohen and Conor Dougherty reported in Thursday’s New York Times that, “When Jared Rutledge called his mortgage broker one morning last week after putting in an offer on a home in Glendale, Ariz., just west of Phoenix, he discovered that the 3.8 percent rate he had been quoted a couple of months ago had already gone up to 4.125 percent. That afternoon, it had inched up to 4.25, and by evening, when he finally called back to finalize the deal, it was 4.375 percent.”
The Times’ writers explained that, “Since the election, mortgage rates have climbed roughly half a percentage point to a 16-month high, adding hundreds, sometimes thousands, of dollars to a home buyer’s yearly payments. (The annual cost of a $400,000 mortgage, for example, rose almost $700.)
“The speed and size of the increase took many lenders and borrowers by surprise — and the increase is expected to reverberate across the housing industry, particularly if rates continue to rise next year.”
Last week’s article noted that, “Wall Street is also expecting that the Federal Reserve Bank will increase its benchmark interest rate when it meets next month. That rate — the cost that banks and depository institutions charge one another for overnight loans — has only an indirect impact on mortgage rates. Last December, for instance, after the Fed raised rates by a quarter of a percentage point, mortgage rates went down. But to the extent it reflects the Fed’s confidence in an improving economic outlook, it could signal higher borrowing costs in the months ahead.
“For now, said Svenja Gudell, chief economist at Zillow, a real estate data provider, the relatively modest increase in mortgage rates should not have much impact on the current housing market.
The New York Times article added that, “On Tuesday, the National Association of Realtors reported existing home sales rose 2 percent at a seasonally adjusted annualized rate in October, its strongest pace since February 2007, before the recession started…[S]till, for buyers who had been counting on paying less than 3.5 percent, the postelection bump represents an unwelcome added cost.”
