Well, here we go again ….
Mortgage interest rates (30-year fixed rate loans) have been very low for a very long time — mostly 5% or below since early 2009, and mostly 4% or lower since late 2011. There have rumors periodically during each of those years that rates were about to rise. We’re hearing it again this week, and if you look at the most recent history, it certainly looks like the rate increases are really here:
Yes, over the past four months, the average 30-year fixed rate mortgage has gone up to more than 4%! But … let’s adjust the scale and add some historical perspective:
For those of you who don’t remember, interest rates spiked to 18% in the early 1980s, and were consistently above 12% from late 1979 through late 1985 — about as long as we’ve had sub-4% rates in this decade. The long-term average (1972 to Present) was 8.2%, about twice today’s rate.
I actually believe that this time we will see rates rise, but not by much and not overnight. I last wrote about this subject almost a year ago (Interest rates going up?), and I included comparisons to other market interest rates and their relationships with mortgage rates.
That post also includes some insight into how higher mortgage rates affect prospective home buyers. If you’re planning a home purchase over the next couple of years, you should be aware that interest rates do impact your buying power.
So … mortgage rates going up? I think so this year. In a recent presentation, Dr. Jim Gaines, Chief Economist at the Texas A&M Real Estate Center, suggested the increase might be in the 0.5% (1/2 of 1%) range by year-end. I’m going to trust Dr. Gaines’ crystal ball on this.