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Thread: Fed sends mortgage rates higher

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    Veteran Member TarynJolie's Avatar
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    Default Fed sends mortgage rates higher

    WASHINGTON (AP) — Rates on 30-year mortgages rose this week as the Federal Reserve pushed a key short-term rate up for the 15th time and indicated that more rate increases were possible.
    Mortgage giant Freddie Mac reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.35% this week, up from 6.32% last week.

    The increase pushed rates to the highest level since they hit a 2˝-year high of 6.37% the week of March 9.

    Analysts attributed the increase to the Fed's decision on Tuesday to raise the federal funds rate, the interest that banks charge each other, to a five-year high of 4.75% while indicating that further rate hikes were possible.

    "The market was a little surprised at the (Fed's) comments which implied more tightening in the future," said Frank Nothaft, chief economist for Freddie Mac.

    "That raised the expectation that inflation may be more of a threat than was previously thought, and that kind of thinking promotes upward pressure on mortgage rates like we saw across the board this week," Nothaft said.

    Rising mortgage rates are expected to cool off the extended boom in housing that saw sales of both new and existing homes set records for five consecutive years. Analysts are looking for sales to drop around 6% this year.

    Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 6.00%, up from 5.97%.

    One-year adjustable rate mortgages rose to 5.51%, from 5.41%.

    Rates on five-year hybrid adjustable rate mortgages rose to 6.02%, from 5.96%.

    The mortgage rates do not include add-on fees known as points. The 30-year and 15-year mortgages carried an average nationwide fee of 0.5 point while the one-year ARM had a fee of 0.8 point and the five-year ARM carried an average fee of 0.6 point.

    A year ago, 30-year mortgages averaged 6.04%, 15-year mortgages stood at 5.58%, one-year adjustable-rate mortgages were at 4.33% and five-year hybrid adjustable rate mortgages averaged 5.43%.

    http://www.usatoday.com/money/perfi/...RM_Exclude=aol

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    Banned Melonie's Avatar
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    Default Re: Fed sends mortgage rates higher

    The kicker here is that some 40% of recent mortgages are thought to be in the Adjustable Rate category, such that the ARM interest rate is subject to readjustment based on the Fed's increases in interbank interest rates. The worry is that someone who entered into a mortgage with a 4.33% initial rate and a $1500 monthly payment may now be facing a 6% interest rate and a $2500 monthly payment when his ARM readjusts this year or next year. As a significant portion of ARM holders are also 'subprime' credit risks, the 'tin foil hat' crowd sees the potential for widespread bankruptcies and forced sales of reposessed homes - which will also tank real estate values for other homes in the same areas - which will in turn make it impossible for other 'shaky' mortgageholders to refi their mortgages (based on the premise that the amount of outstanding balance on their current mortgage will soon be equal to or greater than the actual resale value of their home as that resale value begins to decline).

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    God/dess whirlerz's Avatar
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    Default Re: Fed sends mortgage rates higher

    I'd hate to see what they are for sub-prime...


    MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP

    -Eartha Kitt

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    God/dess Deogol's Avatar
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    Default Re: Fed sends mortgage rates higher

    Quote Originally Posted by whirlerz
    I'd hate to see what they are for sub-prime...
    I use to work for a company that underwrote mortgages. 12-15% plus points. I use to shake my head and wonder if appreciation over time of ownership would actually create profit.

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