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Market News and Trends

Mortgage Interest Rates — Historical Perspective


Mortgage rates are on the move again, and this time it looks like increases are more likely to continue than the brief surges we have seen occasionally over the past couple of years.  Here are the weekly average mortgage rates so far this year:

Weekly Mortgage Rates 2010

Clearly, rates have increased in recent weeks, and since the last “official” data included in this graph loan officers tell me they are quoting even higher rates now.  This week’s data, when released, will likely show that we have returned to interest rates last seen about eight months ago.

I posted last week (Mortgage Rates, Payments, and Buying Power) about the real-world effects of these changes.  It is a fact that higher interest rates reduce home buyers’ purchasing power, and the effect is much more pronounced now than ten years ago — a 1/2% increase from 4% is a much larger change than 1/2% when the rate is 8%. 

Having fanned the flames of buyer discontent last week, I want to offer a little historical perspective.  I have done this before, but it is timely now.

As I pointed out in my previous blogpost, the difference in monthly payment on a $200,000 FHA purchase when the interest rate moves from 4% to 6% is significant:  $244!  And a move to 6% in the coming weeks or months would not be surprising.  Keep in mind, though, that even 6% is incredibly low — artificially so — and waiting another year or two is likely to cost even more.  Note this chart of 30-year mortgage rates since 1963:

Weekly Mortgage Rates 1963-2010
(Reproduced with the permission of Mortgage-X.com)

Yes, for those who didn’t experience it first-hand, that peak in 1981-1982 was at about 15% (and some borrowers paid even more).  Moreover, even if we go back up to 6% early next year, we will still have the lowest mortgage interest rates in more than 40 years! 

Couple that with the fact that the probable direction of home prices will be UP, and the message is that NOW remains an excellent time to buy a home, especially in a strong market like Austin/Central Texas.

It is true that rising rates erode purchasing power, but delay will erode it even more.

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About Bill Morris, Realtor

More than thirty years of business experience (high tech, client service, business organization and start-up, including many years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs: -- Seller Representation is a comprehensive process that begins with thorough market analysis and consultation, continues with properly staging the home to achieve the highest price possible in a reasonable time on market, a complete program of marketing and promotion, ongoing updates and communication, closing coordination, and follow-up throughout (and after) the sale. -- Buyer Representation is also full service: shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. I go the extra mile to help you achieve your goals. That's why I constantly research the market and property values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

Discussion

5 thoughts on “Mortgage Interest Rates — Historical Perspective

  1. If rates rise, won’t prices fall commensurately?

    Posted by Mr. Bubble | December 20, 2010, 11:19 PM
    • I see that you answered this question on your last post. I don’t agree about the direction of prices, but there’s really no way to know.

      Posted by Mr. Bubble | December 20, 2010, 11:21 PM
      • You’re right … only time will really tell. I remain bullish on Austin but the general economy and the national housing market remain more unpredictable than they have been — probably since 1989-90.

        Posted by billmorrisrealtor | December 21, 2010, 12:04 AM

Trackbacks/Pingbacks

  1. Pingback: Mortgage interest rates and monthly payments « Bill Morris on Austin Real Estate - July 29, 2011

  2. Pingback: Mortgage rate future? « Bill Morris on Austin Real Estate - December 7, 2012

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