Why are interest rates rising?

You may be wondering why rates are rising again. Simply, borrower demand is driving up pricing, because banks raise their rates as the available capacity starts to feel pressure and leads to them wanting to realize greater profits. Hopefully this will ease demand, so if rates continue to see demand from borrowers, they (banks, in reaction to investors) start to drive the pricing of interest rates up.

You'll see this occur, because it's basically the rule of supply and demand, amongst other factors as you will read below in this re-post of Bankrate.com's press release I received earlier today.

Ed Bisquera

P.S.  It's not entirely a case of worrying though; I priced out a loan for a client this morning and was at 5 % (5.13% APR), but conditions of loan applicant, loan to value, etc, were driving factors in still securing a competitive rate.  Simply quoting rates of the day is not a simple process, so consult with your mortgage consultant and give him/her ALL the details about your situation, because there are many factors to consider.  :-)  Have a great week!

P.S.S. What does this really mean for consumers that wait instead of locking in low rates, thinking 'but it might go lower' ? It MEANS THAT if you are waiting to lock in rates when rates are falling and thinking it will fall further, all the demand on the pricing while you're waiting, will most possibly cause rates to go back up, because of the supply and demand element. If it's a good deal, those that jump in earlier, rather than later, most likely will take advantage of the deal. Just my two cents... ;-)

=== Mortgage Rates Rebound to Three-Week High (Bankrate) ===

NEW YORK, Jan. 22 /PRNewswire-FirstCall/ -- Mortgage rates increased after falling in each of the previous three weeks. According to Bankrate.com's weekly national survey, the average 30-year fixed mortgage rate is now 5.59 percent with an average of 0.3 discount and origination points.

The average 15-year fixed rate mortgage jumped to 5.2 percent and the average jumbo 30-year fixed rate climbed to 7.22 percent. Adjustable rate mortgages were mixed, with the average 1-year ARM sliding to 5.91 percent and the 5/1 ARM rising to 5.58 percent.

The reversal in mortgage rates was prompted by investors' nervousness about a large supply of government debt and renewed concerns about the health of banks. Higher yields on benchmark Treasury debt and wider mortgage credit spreads spelled an increase in mortgage rates versus one week ago. While mortgage rates remain historically low, the barrier for many homeowners is lack of equity. Similarly, a lack of downpayment could be a barrier to an otherwise well-qualified home buyer.

Lower mortgage rates have opened the door to refinancing for homeowners with equity. As recently as October, the average 30-year fixed mortgage rate was 6.77 percent, meaning a $200,000 loan would have carried a monthly payment of $1,299.86. With the average rate having since fallen to 5.59 percent, the monthly payment on a $200,000 loan is now $1,146.90.

SURVEY RESULTS

30-year fixed: 5.59% -- up from 5.28% last week (avg. points: 0.30)
15-year fixed: 5.20% -- up from 4.89% last week (avg. points: 0.37)
5/1 ARM: 5.58% -- up from 5.51% last week (avg. points: 0.38)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate's weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. There is no firm conviction among the panelists this week, with 38 percent predicting that rates will remain more or less unchanged over the next 30 to 45 days. The remaining respondents are evenly split, with 31 forecasting higher rates and 31 percent expecting lower rates.

For the full mortgage Rate Trend Index, go to http://www.bankrate.com/RTI

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