Until today rates had remained pretty tame. Lower than they had been since the beginning of the year. As the day progressed several alerts came through my email account about potential re-pricing for the worse. All in all from the beginning of the day until the close of the bond market rates went up approximately 0.25% in one day!!!!
To report on mortgages has been nothing more than a crapshoot. Most mortgage though leaders had emphatically assured the consumer that the one sure thing in 2010 is the dramatic increase of interest rates. I was skeptic until today but a 6-6.5% rate by mid April is quite possible. And although by all standards that is still low by all historical measures, it will slam on the brakes at an already fragile housing recovery.
The explanation is somewhat simple. Let’s take for example a buyer that needs a loan for $250,000. Yesterday He/she could have locked that rate for a 30 year fixed at 4.875% translating into a payment of $1,323 before taxes or insurance. At 6.5% that same loan has a payment of $1,580. The difference of the $250/month eliminates a large percentage of home buyers from achieving the American dream due to the tightening of the debt to income ratios.
One thing is for sure. We are entering enigmatic and uncharted territories with regards to real estate.
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