Mortgage Rates Hit High for Year; Sellers See Little Immediate Impact
Mortgage interest rates soared to their highest point this year in reaction to Tuesday's half-point increase in the Federal Reserve's discount rate.</br></br>However, the rate increase came late enough in the peak summer selling season that the housing industry is still likely to turn in a strong year, analysts and housing industry and real estate professionals say.</br></br>The prevailing rate on 30-year fixed-rate loans purchased by Federal Home Loan Mortgage Corp. jumped to 10.82% yesterday from 10.50% Monday, and many adjustable-rate mortgages linked to short-term indexes are climbing past 10.6%, compared with 10.35% at the beginning of the month.</br></br>But although scores of lenders raised their mortgage rates after the Fed raised its discount rate -- the fee it charges on loans to financial institutions -- to 6 1/2% from 6%, lenders and real estate sales people said they expect the immediate impact to be slight.</br></br>In addition to the timing of the increases, economists and real estate sales professionals say adjustable-rate mortgages that often are initially priced below market levels continue to put a floor under sales and make the industry less sensitive to rate fluctuations. Moreover, many prospective home buyers have commitments from lenders for loans at the lower rates that prevailed in June and July.