Impact of higher mortgage rates?

Posted by: Amey Stone on July 22, 2005

This week Greenspan indicated that the Federal Reserve is likely to keep raising rates for the foreseeable future (or at least two or three more times) this year. That news contributed to another small bump up in mortgage rates.

According to Bankrate.com’s July 20 analysis, rates on a 30-year fixed average 5.78% nationally, up from 5.76% a week ago.

Of course, mortgage rates below 6% (they've been that low for nearly four months), are unlikely to cool the housing boom.

And I have another theory I'd like to try out. I think a slight up tick in rates may actually stimulate the housing market. Most people don't understand that Greenspan only affects short-term rates, not necessarily mortgage rates. So when they are considering purchasing a new home knowing that rates are near historic lows -- and then they hear Greenspan plans to keep raising rates and mortgage rates are rising -- it may create a rush to buy.

What do you think?

Reader Comments

MCMortgageBlog

November 21, 2005 3:56 PM

Interesting commentary Amey. The housing market does appear to be cooling down but I think you had a valid point in July. Have your views changed?

I discussed your article here:
http://mcmortgage.blogspot.com/2005/11/could-rising-rates-stimulate-housing.html

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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