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Market News and Trends

Rising Mortgage Rates — A Little Perspective

I have been writing for many months about the coming increase in interest rates.  At the end of March 2010, the Fed ended its program of artificially supporting demand for mortgage-backed securities, keeping interest rates lower than the market would have dictated otherwise.  The time has come, and rates are beginning to rise:

Mortgage Rates Jump

The article notes:  “Many analysts forecast that rates will rise as high as 6 percent by early next year.”  

I suspect that’s true.  Rates may even go a little higher, but (a) there is plenty of time left to make your move if you’re in the market for a home, and (b) from an historical perspective, there is really nothing wrong with paying 6% to 6.5% for a mortgage loan! 

Here’s a  summary of interest rates for a 30-year fixed rate mortgage since April 1971:

Mortgage Rate History 

Ah, there are the “good ol’ days” of  16% to 18% mortgage rates in 1981 and 1982!  But let’s look at just twenty years of history — long after that ugly peak.  From April 1990 through March 2010, the average mortgage rate was 7.14%!  The average over the past 10 years was 6.21%.  The truth is that we’ve only had mortgage interest rates in the 5% and under range for about fifteen months!  And already we consider that “normal,” and act as if anything higher will keep people from buying and hurt the housing market?

I am not anxious for rates to increase, but it’s happening.  Keeping the whole picture in mind, however, all the benefits of home ownership remain — financial leverage, equity build up over the long term, deductibility of related taxes and interest expenses, and — most importantly — the knowledge that you have something really significant that’s yours!

For all the reasons I have written about elsewhere in recent months, the Austin/Central Texas economy and real estate market remain perhaps the strongest in the United States.  If it’s your time to move, don’t let headlines about a “jump” in interest rates scare you off.

About Bill Morris, Realtor

Many years of business experience (high tech, client service, business organization and start-up, including almost 20 years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs. Learn more about my background and experience, my commitment to my clients, my profession, and to the real estate industry at

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