Interest rates jump, time to panic?

Interest rates last week jumped more than half of a percentage point in just one week. The average rate on the 30-year fixed loan soared last week to 4.46 percent, according to a report Thursday from mortgage buyer Freddie Mac. That’s the highest average in two years and a full point more than a month ago. Needless to say that’s a significant event that hasn’t happened for the last 26 years, but what does it mean and why did it happen. What we do know is the surge in mortgage rates follows the Federal Reserve’s signal that it could slow its bond purchases later this year. Many experts feel that a pullback by the Fed would likely send long-term interest rates even higher. So what does all this possibly mean for the housing market? Well, it could signal an increase in home sales as people that are on the fence or have been thinking about buying take the plunge to avoid future interest rate hikes. I know many of you may be thinking, well how much do these rate increases actually affect. Well I’m glad you asked so here’s an example. A buyer who locked in a 3.35 percent rate in early May on a $200,000 mortgage would pay $881 a month, according to Bankrate.com. The same mortgage at a 4.46 percent rate would run $1,008 a month. The difference is approximately $127 more a month, or $45,720 over the lifetime of the loan. I don’t know about you but an additional $45,720 is alot of money. The real concern comes with are we headed for more interest rate hikes in the coming months? Regardless of all of this, now is a great time to buy and people are taking advantage which is spurring positive change in our local Central Florida real estate market. We’ve seen consistent trends from reduction of inventory to increases in average home sales. The hope is we continue on this path and work our way back to a thriving market.