Mortgage Rates Rise for Week of April 5

With the end of the Federal Reserve's massive purchase of mortgage-backed securities (MBS) to keep mortgage rates low, the long-predicted outcome is rising mortgage rates. From the week of March 29 to the week of April 5, mortgage rate averages recorded by HSH Associates rose for 30-year fixed-rate mortgages, 15-year fixed-rate mortgages, and 5/1 hybrid adjustable-rate mortgages (ARMs):

• 30-year mortgage rates rose 0.08%, from 5.41% to 5.49%.
• 15-year mortgage rates rose 0.09%, from 4.79% to 4.88%.
• 5/1 hybrid ARM rates rose but by only 0.02%, from 4.50% to 4.52%.

New Round of Foreclosures on the Horizon?

For home buyers, however, lower home prices may offset the effect of rising rates, as analysts predict a second wave of foreclosures. Historical data indicate that home loans are most likely to fail during their second or third year. FHA's rapidly increasing market share during 2007 and 2008--when some lenders took liberties with FHA guidelines--could result in a wave of foreclosures as these loans have entered or will enter their must vulnerable periods.

Add to this the fact that large numbers of ARM loans are scheduled to reset in the next few years, and it's possible that the pressures are in place to create another round of foreclosures. The result would be depressed property values in many areas, which could prevent many homeowners from refinancing.

Mortgage Loans and the Economy: Fed Chairman Cites High Unemployment, Foreclosures

Federal Reserve Chairman Ben Bernanke recently noted that high unemployment, home foreclosures, and failure of banks to lend to small businesses continue to contribute to ongoing economic woes. Foreclosures present a multifaceted challenge for homeowners, communities, and housing markets:

• Homeowners. Mortgage foreclosure affects homeowner credit for several years and typically prohibits the individual from qualifying for conventional mortgage loans for two to three years.
• Communities. The blight associated with foreclosed homes affects entire neighborhoods, and vacant homes can rapidly deteriorate and attract crime. Lost property tax revenue reduces municipal and county operating budgets.
• Housing markets. Mortgage loan foreclosures can sharply lower home prices.

As the economy continues its bumpy road to full recovery, it's likely that home buyers can continue finding affordable homes. The affordability of home prices can blunt the effects of increasing mortgage rates to some extent. Homeowners wishing to refinance can find lower rates on 15-year fixed-rate mortgages and 5/1 hybrid ARM mortgages. Discuss your mortgage needs and plans with a financial advisor or mortgage professional.

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