U.S. News: Mortgage Rates Rise but Still a Bargain
Rising mortgage rates are pushing up the cost of buying a home just as more local markets are seeing prices and sales climb, but economists say that unless rates move substantially higher the increase is unlikely to derail the U.S. housing recovery.</br></br>Mortgage rates have jumped above 4% for the first time in about a year, hitting 4.15% in the first week of June, up from 3.59% five weeks earlier, according to the Mortgage Bankers Association. The rise represents a 15% increase in the cost of borrowing, or around $50 in the average monthly payment on a $192,800 home, the median price of a previously owned home in April.</br></br>Buyers, while not exactly pleased, have so far taken the rising rates in stride. Sarah Milligan, a 35-year-old teacher from Glendale, Ariz., who has been hunting for a house in the $140,000 range, recently got a disappointing call from her mortgage broker: Her prequalified mortgage rate is now over 4% from just below that level.</br></br>Ms. Milligan, who currently rents a three-bedroom house, says the rate increase won't change her decision to buy, but she said it could move up her timing: "I should probably try to get one as soon as I can."</br></br>While the rise in mortgage rates remains restrained for now, any prohibitive increase could hurt the housing market and the broader economy, which has been buoyed by the real-estate rebound. Already, the recent spike in mortgage rates has produced a sharp drop in refinancing activity, which is much more sensitive to rate increases.