Mortgage Rates Soar House Sales Could Drop When Rush to Beat Increase Stalls
Comerford, Mike, Daily Herald (Arlington Heights, IL)
Byline: Mike Comerford Daily Herald Business Writer
As 30-year mortgage rates jumped to a two-year high, at 8.15 percent, Chicago-area Realtors said homebuyers are rushing into sales offices to lock in rates before rates rise even further.
This week's average rate on 30-year mortgages was the highest since early April 1997, Freddie Mac, the mortgage company, reported Thursday.
Locally, Chicago's Premier Mortgage Lenders, an association of local banks, thrifts and mortgage bankers, estimates that this week local rates hit 8.3 percent on 30-year mortgages.
The 8.13 percent national average rate stands in contrast to a 27-year low last September of 6.66 percent, according to Freddie Mac.
"When the (30-year) rates are up, it just means you have more decisions to make and those decisions could cost you thousands of dollars," said Phil Siebert, president of Schaumburg-based GSF Mortgage Corp. and president of Lombard-based Illinois Association of Mortgage Brokers.
The gap, Siebert said, between 30-year fixed rates and adjustable rate mortgages has widened. The first year of a 30-year fixed-rate $200,000 mortgage, Siebert said, could cost about $250 more a month than a one-year adjustable-rate mortgage. Adjustables currently carry interest rates between 6 percent and 6.5 percent.
Freddie Mac's chief economist Robert Van Order blamed the rise in mortgage rates on investors' fears that the Federal Reserve would raise interest rates for a second time. In June, the Fed nudged up rates by a quarter of a point.
"The stronger-than-expected employment report rattled markets a little last week, continuing to raise fears of action by the Federal Reserve," Van Order said. "An economic climate like that generally results in higher interest rates and that is what we saw in this week's (mortgage rate survey) results," he said. …