Better hurry to buy or refinance, home-loan rates are rising again If you are planning
to buy a home this spring, better hurry. With home-loan rates nearing
6 percent, it appears that the best mortgage deals since the 1950s
are rapidly vanishing. In late April,
30-year fixed-rate mortgages averaged 5.94 percent, up from 5.89 percent
a week earlier, according to Freddie Mac’s Primary Mortgage Market
Survey. Last year at this time, benchmark 30-year fixed loans averaged
5.79 percent. “Rates have
moved upward more than a half of 1 percentage point over the past
five weeks,” said William Arnold, a loan officer with Mid America
Bank. “We now are quoting 6 percent on our 30-year fixed mortgages,
up from 5.375 percent on March 12. Rates on five-year adjustable-rate
loans now are going for 5 percent, up from 4.125 percent five weeks
ago.” The rate hike
means that the monthly principal and interest payment on a $250,000
home loan would increase by about $100, to $1,500 a month for a typical
30-year mortgage. The payment on a five-year ARM would be around $1,342.
Adjustable-rate
mortgages (ARMs) still are the best deal. One-year Treasury-indexed
ARMs averaged 3.69 percent in late April, unchanged from a week earlier,
Freddie Mac reported. At this time last year, the one-year ARM averaged
3.79 percent. The rising rates
come against the backdrop of an improving jobs picture. The March
employment report documented an unexpectedly large jump in non-farm,
payroll employment. In total, 308,000 jobs were added in the U.S.
economy in March, the largest gain since April of 2000. The January
and February employment numbers were also revised upward by a total
of nearly 90,000 jobs. “The job
gains came primarily in the construction sector, which added 71,000
jobs, reflecting strong demand for new housing, and the retail service
sectors,” Freddie Mac’s economic outlook reported. “March
marked the first month since August of 2000 that there were no job
losses in the manufacturing sector.” While interest
rates are rising, deals still are out there for home buyers who shop
around, experts say. For example, condominium
and townhome buyers at the 36-unit Shakespeare Court, a new-construction
development in the North Kenwood neighborhood on Chicago’s South
Side, now can qualify for a fixed-rate mortgage with an initial rate
of 4 percent under a special loan program offered by the Thrush Companies
and Wells Fargo Home Mortgage. “Under our
affordable buy-down loan program a family can purchase a two-bedroom,
two-full-bath brick condominium for $238,900 with only a 5 percent
down payment and own their home for a monthly principal and interest
payment of only $1,083,” said developer David L. Chase, president
and CEO of the Thrush Companies. Despite the increases
in rates, Frank Nothaft, Freddie Mac chief economist, said home purchase
applications were still strong. “However, refinancing applications
fell over the last four weeks, according to the Mortgage Bankers survey,
and the decline is due almost entirely to higher mortgage rates,”
Nothaft said. Meanwhile, Alan
Greenspan, Federal Reserve Board chairman, told Congress that America’s
recovery has good momentum, and that it’s likely that short-term
interest rates will have to rise. Since June of 2003, the Fed has
held the federal funds rate, a key short-term interest rate, at 1
percent, the lowest level since 1958. “Although
this past month’s dramatic rise in mortgage rates is consistent
with an economic recovery, it will take more than one month of strong
employment gains to verify this recovery is sustainable,” Nothaft
said. “The market
is behaving as though the recovery is a fait accompli and has entered
a volatile period of trying to outguess the Federal Reserve Board’s
next move,” he said. |