Rates have been unsustainably low for the past few years, and as opposed to making houses more affordable, they have monetized house prices (Driven price increases).
The historic rate has been around 9%. We can expect some overshoot, so I expect to see 15+% for a few months at least as the lending industry gets over its "mortgage for anyone with a pulse" hangover.
Home Buyers: A Borrowed Dime Grows More Costly
Higher Mortgage Rates Reflect Inflation Fears
By Nell Henderson
Washington Post Staff Writer
Sunday, June 17, 2007; Page F01
The price of money has gone up.
Or more technically, long-term interest rates have jumped in recent weeks, rattling the already slumping housing market.
When potential home buyers call for mortgage rate quotes these days, "they're shocked; they almost don't believe you," said Jim Foley, senior vice president of George Mason Mortgage. "They're quick to get off the phone to make more calls."
The average rate on a 30-year, fixed-rate mortgage rose to 6.74 percent last week, up more than half a percentage point in four weeks, from 6.21 percent, according to mortgage financier Freddie Mac. That would boost the monthly payment on a $400,000 mortgage by $139.
Underlying the jump in interest rates was a shift in sentiment in the financial markets. Early this year, many investors worried about a possible recession, causing rates to fall. More recently, they have concluded that strong U.S. and global economic growth will sustain inflation pressures in the months ahead, pushing rates higher.
Consumers are also paying higher rates on new home-equity and auto loans than they would have two weeks ago. Many companies are facing higher borrowing costs.
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