Anyone who thinks that interest rates don't have a huge impact on the market only needs to review what happened in September when rates were down and now in October as rates are rising again. While many potential buyers are fixated on home prices the real driving force is monthly affordability. If the price drops 20% but rates go up 2% the drop in price doesn't mean much.
The following article is from Reuters News:
The number of applications for U.S. home mortgages slipped last week, reduced by a drop in refinancings to 45 percent of total applications as interest rates rose for the third straight week, according to the Mortgage Bankers Association.
The seasonally adjusted index of total mortgage applications fell 2.2 percent to 585.8 for the week ended Oct. 13, the second consecutive week the index declined.
The average rate on 30-year, fixed-rate mortgages was 6.33 percent last week, up 0.15 percentage point from the September low of 6.18 percent. The average rate for 15-year, fixed-rate mortgages increased to 6.01 percent from 5.9 percent. The average interest rate for one-year adjustable-rate mortgages increased to 5.94 percent from 5.88 percent.
Source: Reuters News (10/18/06)
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