Interest Rate Roundup

Wednesday, April 23, 2008

Higher interest rates and the possible impact on housing

Sorry for the lack of posts today -- been pretty busy at the day job. One thing that I couldn't help comment on, however: Have you noticed that mortgage rates have been ticking higher lately? And that this has had an impact on purchase applications?

The Mortgage Bankers Association's weekly purchase application index dropped 6.4% to 357.30 in the week of April 18. This index has only been lower once this year -- 356 in the week of March 28. The MBA also said its measure of 30-year fixed-rate loan rates popped back above 6% (6.04%) for the first time since the beginning of March.

Now I don't want to make too big a deal out of this. But if we were to break down out of the recent range in purchases (let's say, below 350) and/or break out to the upside in interest rates (let's call it above 4% in the 10-year Treasury note yield, or 6.4% on 30-year mortgages), it'll be something to pay attention to.

The culprit for this recent upside move appears to be inflation fears, spurred by record-high commodity prices, and the flight of money out of bonds and into stocks, spurred by greater risk-taking behavior on the part of investors.


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