Thursday, May 20, 2004

Yikes! Rate Hikes! - Will Rising Rates Hinder Economic Growth?

Mortgage rates have trended higher since mid-March with rising Treasury yields as data suggested faster U.S. economic growth and growing inflationary pressure. Higher mortgage rates have curtailed refinancing activities. Will this hinder economic growth? The experts say the economy will still continue to grow at a steady pace.

It's undeniable that the mortgage industry thrived on home refinancing alone while homeowners successfully locking in rate below 6 percent saved thousands in loan costs when refinancing.

Home refinancing became something of a staple. Home construction increased, renovation and remodeling boosted the real estate industry. If you got the cash out option you had more money to spend and that benefited merchants everywhere. Folks were seemly happy. Now however rates are rising and get this, the Feds seem intent on raising them further.

No big deal? Perhaps not, if it weren't for the fact that home refinancing is dropping off at an accelerated pace.

One wonders, if the economy can still turn itself around without the help of low interest rate home financing.

We cannot ignore the fact that home sales and construction have yet to show signs of dropping off. And recent mortgage rate trends show an actual dip in rate levels.

The average interest rate for 30-year fixed-rate mortgages in the MBA actually decreased to 6.21 percent from 6.32 percent from one week earlier

A comparison to previous years show that rates are still at attractive levels as many borrowers are still paying loan costs at 7.0-8.0% and others are seeking to benefit from shorter term loans where rates are under 6 percent. Not Bad, Huh? ...time will tell.

Still I must admit friends and family made out like a fat cat these past three years taking advantage of historic rates and refund benefits. I pity the fool who let this opportunity get by him. read more here