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While Still Historically Low, Home Mortgage Rates at Highest Level in a Year – but Home Sales Still on the Rise


Based upon worries that the Federal Reserve may begin to slow its stimulus efforts, U.S. mortgage rates during the last week of May have shot up to their highest level in a year.  Unfortunately, this has dried up demand for home re-fi’s reports data from an industry group. The Mortgage Bankers Association (MBA) said interest rates on a 30-year fixed mortgage surged 12 basis points to average 3.90 percent in the week ending May 24. This is the highest level since May of last year and the biggest jump in 14 months. (Source: Reuters)

Although applications for refinanced mortgages fell 15 percent as of the week ending May 24, new-purchase mortgage applications actually rose three percent and hit a three-year high, indicating more buying activity. (Source: MBA)

When it comes to accelerating home purchases, the latest data from the MBA support the fact that home buyers do indeed feel the pressure to move forward before rates rise further. After all, even after their recent move upward, mortgage rates are still very low by historical standards. Using a standard mortgage calculator, you will find that on a $200,000 loan over 30 years, the difference in payment is approximately $56 per month with the increased interest rates. While this adds up, it doesn’t make buying a home cost-prohibitive.

Whether you are needing a traditional re-fi or wanting to purchase a home, the timing may still be very right for you as interest rates are still at historical low’s compared to years past (see chart above). Talk to your preferred lender to see what loan type, if any, makes the most sense for you.

 

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