Mortgage rates rise for the week of August 4, 2014

Posted by  on Aug 11, 2014

There was little movement in mortgage rates this week as investors were pulled in two directions at the same time: by encouraging economic data at home, and worrisome (and tragic) geopolitical news abroad. Often, a strengthening domestic economy tends to push up rates, but instability abroad usually has the opposite effect.

Mortgage rates this week

Most people are interested in the 30-year fixed-rate mortgage (FRM), which is by far the most popular type of home loan. The average rate for this rose by just 2 basis points over the week ending August 8 to 4.23 percent from 4.21 percent, according to HSH.com. At the same time, points fell to 0.13 from 0.16. Rates and points for 15-year FRMs held steady over the same period at 3.48 percent and 0.11 respectively. Some adjustable-rate mortgages (ARMs) traveled in the opposite direction, with average rates for 30-year 1/1 ARMs falling to 2.71 percent from 2.78 percent. However, points for these increased slightly to 0.13 from 0.11.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.

HELOC hell on the horizon

Credit bureau TransUnion issued a warning on August 7 that might worry many who have home equity lines of credit (HELOCs). Most of these still in existence were issued between 2005 and 2007, and came with 10-year draw terms. That means a whole lot of them are going to reach their "end of draw" (EOD) periods over the next two or three years.

And, if yours is one of them, that could spell trouble. That's because an EOD doesn't just mean you can't draw down on your line of credit anymore: it also means you've got to start paying both the principal (the amount borrowed) and the interest on your balance, So your monthly payments could suddenly shoot up.

TransUnion reckons that millions of the 16 million borrowers who between them owe about $474 billion on their HELOCs might be "at elevated risk of default in the next few years." The total amount at special risk could be as high as $79 billion.

Refinance rides to the rescue

One way to escape higher HELOC payments is to refinance your mortgage. Depending on your circumstances, a cash-in refinance could release sufficient equity in your home to clear your HELOC debt. But should you do so now or wait until the crisis gets closer?

Well, nobody can predict whether refinance rates are going to be higher or lower by the time your HELOC's EOD arrives -- or whether mortgages are going to more or less easily available. But most experts expect rates to be much the same or higher. Unless you enjoy living on the edge, you may wish to act sooner rather than later to secure your future.

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