30-Year Fixed Mortgage Rates On The Rise

by: Calafia Beach Pundit

Those in the market for a fixed-rate mortgage should be sure to study this chart. It's not yet common knowledge that 30-yr fixed conforming mortgage rates hit an all-time low of 3.3% less than six months ago, and have since risen to at least 4.2%. It's probably hard to find anything lower than 4.4% today, according to this report (HT Calculated Risk). The days of three-handle 30-yr mortgage rates are probably a thing of the past.

So will rising mortgage rates kill the housing market? According to Case-Shiller, nationwide housing prices have risen at a 6.5% annualized clip for the past five years, and have now eclipsed their 2006 highs. In real terms, however, housing prices today are still about 15% lower than they were in 2006, as seen in the chart below:

Higher mortgage rates increase the effective cost of owning a home, so at some point, higher rates are likely to slow down the housing market. But for now, I would argue that it's best to think that higher rates are a by-product of a stronger economy and stronger demand. Mortgage rates and housing prices are rising because demand for housing remains strong at a time when lenders are becoming less willing to lend at what are still relatively low rates from an historical perspective. It's all part and parcel of increased confidence and stronger growth fundamentals.