Orange County, CA – The improving housing market and the increase in consumer spending are pleasing to some people. But for people looking to borrow money the latest announcements aren’t music to everyone’s ears. The U.S. economy is clearly growing with 29 straight months of job growth. But this means that mortgage interest rates are being pushed up at the same time. At the moment rates are their highest for the past thirty weeks. And this trend doesn’t look like stopping anytime soon.
You can see the upward trend began back in November of last year. A slow increase in interest rates has continued ever since. The fiscal cliff of January 1st of this year spurred the escalation in interest rates. Rates bottomed out during the week of November 21st, 2012 at 3.31%. We have now moved forward to 3.54% nationwide, according to the government backed mortgage securitizer Freddie Mac. This is a rather large .23% jump overall but down from the spike up to 3.63% that we experienced 2 weeks ago. To give some perspective on the current situation, mortgage interest rates have kicked off the year worse than any other year since 1996. On top of this, Freddie Mac’s reported interest rate of 3.54% doesn’t take into account that it is priced with an average 0.8% discount points. So to be able to access the advertised rate, you have to pay down $800 in discount points for every $100,000 borrowed. This means that this relatively “high” interest rate is only accessible if you pay for it!
To give a bit of shade to this, someone buying in Orange County at the mortgage loan limit of $625,000 would have to fork out above and beyond $5000 to be able to access the 3.54% interest rate. Doing so would raise one’s closing costs. To avoid higher closing costs would mean agreeing to a higher interest rate that did not require the payment of discount points.
This rate would be more like 3.875% – should they fall into the bracket of being a prime borrower. Anyone with a FICO score below 740 or with a smaller proportion of equity is likely to be looking at an interest rate at or above 4.000%. Back in November we were experiencing lifetime low interest rates but those days are gone. We’re in an appreciating market now. This means it can pay to get out there and secure your mortgage now. Rates appear to be rising yet further, so any reasonable deals you see today may not be available tomorrow.