As Mortgage Rates Move, Headaches Follow
June 20 2009 - When Jennifer and Sam Lam put a contract in on a home in late April, they had timed the deal perfectly, with mortgage rates hovering under 5 percent. After an inspection revealed structural problems, it took the couple only a few weeks to find another place — this one a three-bedroom, 2 1/2 -bath Capitol Hill rowhouse with a basement rental.
On May 27, they submitted their offer, only to learn that their good timing had apparently expired. The seller rejected their price, and mortgage rates rose almost three-quarters of a point in the following two weeks. They would have increased their offer, but couldn’t anymore: The higher rates would have added a couple hundred dollars each month, which they could not afford.
Jennifer Lam said they are still looking for homes but have been forced to alter expectations. “We might be getting a house different in size and condition and location than we wanted,” she said.
Mortgage rates move with the yield on 10-year Treasury notes, which spiked recently on investors’ concerns about U.S. debt levels. The rate on 30-year, fixed-rate mortgages fell to historic lows under 5 percent in March, reaching 4.78 percent in April, according to Freddie Mac. It had more or less flattened until a few weeks ago, when it jumped to 5.59 percent from 4.91 percent in two weeks. Last week, the rate fell back to 5.38 percent. The rise has chased buyers from deals, motivated others to finally buy, and prompted some to pony up and pay for lower rates.
On a $250,000 loan, the two-week jump translates into about $100 more each month.
“I’m not sure now that the average consumer realizes how significantly rates have increased or the impact on monthly payments,” said Brian Bonnet, president of Signature Mortgage Services.
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