longer term mortgages [Archive]

mlk_man

10-13-2005, 06:26 AM

Mortgages: Bracing for 6%
Driven by energy costs & inflation, the average 30-year rate could reach 6.7% in 2006, say experts.
October 12, 2005: 4:49 PM EDT
By Rob Kelley, CNN/Money staff writer

http://money.cnn.com/2005/10/11/real_estate/mortgage_rates/danger_rates_oct.gif

http://i.cnn.net/money/.element/img/1.0/launcher/money101/08insert_buying_home.gif (http://money.cnn.com/pf/101/lessons/8)

Top things to know (http://money.cnn.com/pf/101/lessons/8/index.html)

Are you ready? (http://money.cnn.com/pf/101/lessons/8/page1.html)

Lining up cash (http://money.cnn.com/pf/101/lessons/8/page2.html)

Picking a team (http://money.cnn.com/pf/101/lessons/8/page3.html)

The hunt (http://money.cnn.com/pf/101/lessons/8/page4.html)

Closing the deal (http://money.cnn.com/pf/101/lessons/8/page5.html)

For sellers only (http://money.cnn.com/pf/101/lessons/8/page6.html)

http://i.a.cnn.net/money/images/contextual/advlinks1.gif
http://i.a.cnn.net/money/images/contextual/cl_bar.gif
http://i.a.cnn.net/money/images/contextual/whatsthis.gif (javascript:CNN_openPopup('/services/overture/cl/frameset.exclude.html','620x430','toolbar=no,locat ion=no,directories=no,status=no,menubar=no,scrollb ars=no,resizable=no,width=620,height=430'))

Great Mortgage Rates (http://www21.overture.com/d/sr/?xargs=15KPjg1%5FZSyIK9k7PyMPiIRvydhRlLisDrsI85XsY sXYQapTFpDbU8Lb2SxJhnQq84q0yDmOeXiO5HdKykjqiHEwuJR UXYYJfy2InBzIM5NqqpWccF%5FschwO2d7YNMPXZ3ZGuye6PPl vieeYL0PnlO%5FplwlV6U%5FPBvw8y2x%2DIWGbrOmwcpuQ%2D MdaM47dMqiLjDX%2D8PSromdt2QZxWlFMUdntF1wN2bPyAUXSL Q4Wt%2DrFiWZ0NyoLiRDLI5mcPy7%5FmRaJLr3ppTaE2V%5Ffx 1rGfWynPPlt4qICnT1%2DwH0VPZYru8SQrcnkhWyKPejOzcN9V hoDGoT9qfGnL1dyIqPgEvB%2DHkbwuASjxjvFzSIskTMo3%5Fv nbRVPjYYnNjKhcXrYLqY8sH9U%2DZiSUbOiab1qTi5X4Labcr3 BrCk1E%2E&yargs=www.mortgagerates4less.com)
Search hundreds of lenders for low mortgage quotes. Free. No obligation.
www.mortgagerates4less.com (http://www21.overture.com/d/sr/?xargs=15KPjg1%5FZSyIK9k7PyMPiIRvydhRlLisDrsI85XsY sXYQapTFpDbU8Lb2SxJhnQq84q0yDmOeXiO5HdKykjqiHEwuJR UXYYJfy2InBzIM5NqqpWccF%5FschwO2d7YNMPXZ3ZGuye6PPl vieeYL0PnlO%5FplwlV6U%5FPBvw8y2x%2DIWGbrOmwcpuQ%2D MdaM47dMqiLjDX%2D8PSromdt2QZxWlFMUdntF1wN2bPyAUXSL Q4Wt%2DrFiWZ0NyoLiRDLI5mcPy7%5FmRaJLr3ppTaE2V%5Ffx 1rGfWynPPlt4qICnT1%2DwH0VPZYru8SQrcnkhWyKPejOzcN9V hoDGoT9qfGnL1dyIqPgEvB%2DHkbwuASjxjvFzSIskTMo3%5Fv nbRVPjYYnNjKhcXrYLqY8sH9U%2DZiSUbOiab1qTi5X4Labcr3 BrCk1E%2E&yargs=www.mortgagerates4less.com)
http://i.a.cnn.net/money/images/contextual/cl_dotted.gif
Mortgage Rates - LendingTree.com (http://www21.overture.com/d/sr/?xargs=15KPjg1CBSv4K9k7PyMPiIRvydggdEwcGpt4g7TYx4H 9Fc7icrBKIqLeeFzpYgU7IyqhGQ%5F8Ii4%2DVXM%5FLk06TMT 0rdT1OJH%2Dr51YmQy4o%5FYKn3XdVHh%2DZ9z7y4mI8aPS5XN 2a3c4G5n%2DiYc9fxa39L%5FY4BmBydq%5FI6x52yk%2DZPRLP e3lsr8QnSc5oM6%5FYshcrLL88NGLZVeYyYwXXDJZ4SzNtwwer yNHIaKyr07DxYr1%2DDLTV28PqbfdlY6LT4zN6aa%2DL6yt1eJ lvWtqh262rO4U623IhmNQudlvQe10BYHvWoOWSKzEl6%5FbCM0 6%5FEeIA%5F52HxGpmaCCe1Ph9lLQYxEpbdShaBYCNvt0e2B21 sQMis%2DSniMIiECygiZB4U7da2PpOA11Scw5RefhApcpR0jmg adUZe4Q%2D85TTEvwg72%5F9k9PbaKtFV6vj3lEbKVHBUuQGkp o61GMK39XAC5zVejPkOa6Rekp0g0lxV%2DTbZVsb6gKtXothWY %5FykxiEI96W3ekd2PuOINe0naoovKSDLC8XxR6nD3lp6Xx8Q3 2Txq7bw2QHd9rQOG7qYgnk9x1BvUn41PR8Kuvbap%2DPQmjjjG TT9v3mDSvuNmRXsk5s%5FCRm4t4E3phnv2LAyHTcriYtriv5c6 QlDNr5JyxApoOGddWG3BMzv1tnkgmORwemJs6l2qqgdocacC06 ZzuqspDNQzztKhAKlMSkApCoB94jFqisJpCP4TIGTqZn%2DsVR 9tOTtysoRnr9wDthbuKqYgcTsuw0%2E&yargs=www.lendingt ree.com)
Find out how much you can borrow for a mortgage and how much your mortgage...
www.lendingtree.com (http://www21.overture.com/d/sr/?xargs=15KPjg1CBSv4K9k7PyMPiIRvydggdEwcGpt4g7TYx4H 9Fc7icrBKIqLeeFzpYgU7IyqhGQ%5F8Ii4%2DVXM%5FLk06TMT 0rdT1OJH%2Dr51YmQy4o%5FYKn3XdVHh%2DZ9z7y4mI8aPS5XN 2a3c4G5n%2DiYc9fxa39L%5FY4BmBydq%5FI6x52yk%2DZPRLP e3lsr8QnSc5oM6%5FYshcrLL88NGLZVeYyYwXXDJZ4SzNtwwer yNHIaKyr07DxYr1%2DDLTV28PqbfdlY6LT4zN6aa%2DL6yt1eJ lvWtqh262rO4U623IhmNQudlvQe10BYHvWoOWSKzEl6%5FbCM0 6%5FEeIA%5F52HxGpmaCCe1Ph9lLQYxEpbdShaBYCNvt0e2B21 sQMis%2DSniMIiECygiZB4U7da2PpOA11Scw5RefhApcpR0jmg adUZe4Q%2D85TTEvwg72%5F9k9PbaKtFV6vj3lEbKVHBUuQGkp o61GMK39XAC5zVejPkOa6Rekp0g0lxV%2DTbZVsb6gKtXothWY %5FykxiEI96W3ekd2PuOINe0naoovKSDLC8XxR6nD3lp6Xx8Q3 2Txq7bw2QHd9rQOG7qYgnk9x1BvUn41PR8Kuvbap%2DPQmjjjG TT9v3mDSvuNmRXsk5s%5FCRm4t4E3phnv2LAyHTcriYtriv5c6 QlDNr5JyxApoOGddWG3BMzv1tnkgmORwemJs6l2qqgdocacC06 ZzuqspDNQzztKhAKlMSkApCoB94jFqisJpCP4TIGTqZn%2DsVR 9tOTtysoRnr9wDthbuKqYgcTsuw0%2E&yargs=www.lendingt ree.com)
http://i.a.cnn.net/money/images/contextual/cl_dotted.gif
Get Four Free Mortgage Rate Quotes (http://www21.overture.com/d/sr/?xargs=15KPjg19BSBYK9k7PyMPiID%2Dmd3RlL04Pop5U6Vs8 uQ4APpCcvEv4sMf7expo6Cbs2uVvNj6PQqblFeq70x73XSUqbR if2HJr32vO5t%2D5CQqbCPNBPhMklvI%5Fp5vg5Q2lVb2%2D0e NKoz5e4LdP5On5I%5F40Bzh2Pv4gazMyxxuYYYc7Qqlp5%5FSq gJu4Sv%5Fl9jM3GLJofOeoWctiblCGfeZtCydlxhq7xb2JBcFL W6WsM2VmJUDAJ1KjNdPwAvbwFqbz8ML6okdkOW3SG9fRlnRfkz Hrvz4h1dQmPiKUF6SoJSd3%2DaTup%5FB1t66PchfTSIconx3C sRJ6GQzjhMhMlIxswX3bCLAH1FWAqoWfnfpRGb86w8yGgAbaAG 2Yqa1UXj4L2fJhToQCbkGQBVjnGBMCG5HoKdrMrhHW36j%5Fpq Akxyv91qKmEIdJV%2DdDEhjbzFHDCiT3x98z4D%5F%5FO%2DCc x0w%2E%2E&yargs=www.lendingleaders.com)
Easy approval. Get quotes from 4 lenders. Low-rate mortgage and refinance loans....
www.lendingleaders.com (http://www21.overture.com/d/sr/?xargs=15KPjg19BSBYK9k7PyMPiID%2Dmd3RlL04Pop5U6Vs8 uQ4APpCcvEv4sMf7expo6Cbs2uVvNj6PQqblFeq70x73XSUqbR if2HJr32vO5t%2D5CQqbCPNBPhMklvI%5Fp5vg5Q2lVb2%2D0e NKoz5e4LdP5On5I%5F40Bzh2Pv4gazMyxxuYYYc7Qqlp5%5FSq gJu4Sv%5Fl9jM3GLJofOeoWctiblCGfeZtCydlxhq7xb2JBcFL W6WsM2VmJUDAJ1KjNdPwAvbwFqbz8ML6okdkOW3SG9fRlnRfkz Hrvz4h1dQmPiKUF6SoJSd3%2DaTup%5FB1t66PchfTSIconx3C sRJ6GQzjhMhMlIxswX3bCLAH1FWAqoWfnfpRGb86w8yGgAbaAG 2Yqa1UXj4L2fJhToQCbkGQBVjnGBMCG5HoKdrMrhHW36j%5Fpq Akxyv91qKmEIdJV%2DdDEhjbzFHDCiT3x98z4D%5F%5FO%2DCc x0w%2E%2E&yargs=www.lendingleaders.com)
http://i.a.cnn.net/money/images/contextual/cl_dotted.gif
todays morgage rates (http://www21.overture.com/d/sr/?xargs=15KPjg1%2DFSyIK9k7PyMPiID%2Dmd3RlL04Pwo4k5W tUlSosKqSw6T7MgM7zXyMh5Tuhn%2DF%2Dpuf%2DV%2DK4WJfv %2Dn%5FKDBEz3MV76HeGO2PnGxYI6N6fVUKVPkeF1kufom4ZOK gxeIWOwetS5l%2D7JJtD6PWgIq95BnkXgifxqwby1zJMeZs%5F e2FoL8ljd1ag3ifl01MHDeao5D7NVeayQ4SOSAppC3Z8GneyyY llmJV6q7RkOrFKWZnNyoqfLdYcf%5FcyxmYLKNre0iooPNRvNt fk%2Dt1zSni%5FKnJohZz7Xn%5FAg8FMFS7X7fjPflgoorriZg fHZP7wy%5FHTxHI7URC%2DpDh8kIgckA%5F%2D8fxGPYTRTtlf ZHMYCOY24uHLgW7yCG2J2JUx03pNEBfVCvFmZhypyg1etG8SV4 3oNP%2DJO4So%2E&yargs=www.targetlending.com)
4 out of 5 Applicants Approved. Low Rates and Low Monthly Payments. 1 Minute...
www.targetlending.com (http://www21.overture.com/d/sr/?xargs=15KPjg1%2DFSyIK9k7PyMPiID%2Dmd3RlL04Pwo4k5W tUlSosKqSw6T7MgM7zXyMh5Tuhn%2DF%2Dpuf%2DV%2DK4WJfv %2Dn%5FKDBEz3MV76HeGO2PnGxYI6N6fVUKVPkeF1kufom4ZOK gxeIWOwetS5l%2D7JJtD6PWgIq95BnkXgifxqwby1zJMeZs%5F e2FoL8ljd1ag3ifl01MHDeao5D7NVeayQ4SOSAppC3Z8GneyyY llmJV6q7RkOrFKWZnNyoqfLdYcf%5FcyxmYLKNre0iooPNRvNt fk%2Dt1zSni%5FKnJohZz7Xn%5FAg8FMFS7X7fjPflgoorriZg fHZP7wy%5FHTxHI7URC%2DpDh8kIgckA%5F%2D8fxGPYTRTtlf ZHMYCOY24uHLgW7yCG2J2JUx03pNEBfVCvFmZhypyg1etG8SV4 3oNP%2DJO4So%2E&yargs=www.targetlending.com)
if(cnnEnableCL){if(location.hostname.indexOf('.cnn .com')==-1){cnnAddCSI('contextualLinks','/.element/ssi/contextual/story.html','origin=money&site=cnn_monrealestate_dyn_ctxt&category=moneyrealestate&url=http://robots.cnnfn.com/2005/10/11/real_estate/mortgage_rates/index.htm');}else{cnnAddCSI('contextualLinks','htt p://cl.cnn.com/ctxtlink/jsp/money-story.jsp','origin=money&site=cnn_monrealestate_dyn_ctxt&category=moneyrealestate&url=http://robots.cnnfn.com/2005/10/11/real_estate/mortgage_rates/index.htm');}}

NEW YORK (CNN/Money) - 30-year mortgage rates look set to rise above 6 percent for the first time since July 2004, potentially helping set the stage for a slowdown in home sales.

Freddie Mac reported last week that the average rate on 30-year fixed-rate mortgages rose to 5.98 percent. (Full story (http://money.cnn.com/2005/10/06/real_estate/weekly_rates/index.htm))

Rates first dipped below 6 percent in January 2003, having not been that low since 1965, according to Freddie Mac. They fell as low as 5.23 percent in June 2003 before rising again.

The average annual rate in the 1990s was 8.12 percent. In the 1980s, the rate averaged a whopping 12.70 percent, getting as high as 18.45 percent in inflation-ridden October 1981. The high 30-year rate of the early 1980s contributed to abysmal home sales rates in those years.

Real estate's unprecedented tear -- the past four-and-a-half years all set new records for existing-home sales -- has been facilitated by easy credit, but that era may be on its way out.

"Right now, we're seeing upward momentum in long-term rates, especially with new inflation worries," said Daniel Jester, an analyst with Economy.com. "Long-term rates have been so low for so long compared to where they'd normally be in the business cycle -- at some point a correction is necessary."

Jester believes rates will reach 6 percent this week or the week following. Freddie Mac will make its weekly announcement on average rates on Thursday.

"The main reason why the 30-year rate stayed low despite the Fed's short-term rate hikes is that people saw inflation as well-contained," said Lawrence Yun, senior economist at the National Association of Realtors (NAR). "Now that inflation appears to be out of its container as a result of energy prices, we are seeing some jumpiness in the long-term rates."

"We expect a very slow climb in the 30-year fixed, to 6.7 percent by the end of 2006," said NAR spokesman Walter Maloney.

The pinch of the sixes
As rates rise, so will the prospective home buyers' monthly mortgage payment, and the housing market could cool as it sees fewer potential buyers.

But analysts disagree over what type of rate rises it would take to usher in this scenario.

"The number which we believe will cause tangible cooling is 6.5 percent," said Economy.com's Jester. "But because so many people have already bought into the market, the number could even be a bit lower."

The NAR calculates a monthly Housing Affordability Index -- a measure of how easy it is for a family with a median income to purchase a median-priced home -- with 100 meaning a family has exactly enough income for a purchase.

When mortgage rates rise, the affordability index declines -- a family either needs more income or has to buy a less expensive home.

The NAR's Maloney says that the 30-year fixed would have to climb all the way to 8.6 percent to make homes less affordable -- and bring the index down to its median 100.

"Sales should slow a little bit next year, but look at the incredible years we're comparing that to," he said.

The NAR puts the median US home price in August at $219,400. To afford a home at that price with a 30-year mortgage at the current average of 5.98 percent, a home buyer would have to make monthly payments of $1,312.

At a mortgage rate of 6.5 percent, that figure rises to $1,387 a month, pricing a new home out of reach of some salaries.

In addition, the raft of nontraditional mortgage products available for people seeking smaller monthly payments -- interest-only mortgages and option adjustable-rate mortgages -- are becoming more difficult to obtain as interest rates rise.

"We're seeing a tightening up on mortgage terms. In 12 to 18 months, we'll get the first payment shocks from these new types of mortgages," said Nick Retsinas, Director of Harvard's Joint Center for Housing Studies. "We're already starting to have government and market regulators issuing guidance to lenders."

Because lenders have made mortgages more available to people with small down payments, they are likely to encounter increasing defaults in coming months. Loan regulators are concerned that mortgage terms not be too lenient.

Who will feel it first?
When higher 30-year rates do take hold, who will be hurt the most?

"First-time buyers will definitely feel it. In many markets, there's been such upward price pressure that the only way people have been able to get into home is through low rates," said Retsinas.

"I think both people seeking 30-year mortgages and adjustable rate mortgages will be affected by higher rates," said Economy.com's Jester. "The long-term rate rises will make it hard for many home buyers to qualify for a 30-year, and short-term rate hikes will pinch those who want ARMs."

The Federal Reserve last raised the federal funds rate a quarter-percentage point to 3.75 percent on September 20th, and is widely expected to continue with the hikes. (Full story (http://money.cnn.com/2005/09/20/news/economy/fed_rates/index.htm))

Home pricing also continues its miraculous rise -- as indicated by the last week's report that 86 percent of California residents could not buy a typical home with a traditional down-payment, according to the California Association of Realtors. (Full story (http://money.cnn.com/2005/10/06/real_estate/property_california.reut/index.htm))

With pricing and mortgage rates conspiring against home buyers, it just got a little more difficult to pin down your dream home.