Bryan Fife
bryan@newsroom.byu.edu
The 30- and 15-year fixed mortgage rates are the highest they have been since March of 1995.
Freddie Mac, the nation's second largest mortgage financier, reported that their Primary Mortgage Market Survey shows that the 30-year fixed rate mortgage (FRM) averaged 8.52 percent for the week ending May 12, 2000. Freddie Mac's survey also revealed that the 15-year FRM averaged 8.17 percent for the week ending May 12, 2000.
Robert Van Order, Freddie Mac's chief economist, said that long term mortgage rates jumped this week because of anticipation that the Federal Reserve will raise interest rates higher than previously thought due to recent data concerning increased inflation.
Order also said that the upcoming results of the Producer Price Index, as well as the Consumer Price Index, will indicate the depth of the current inflation which will have a direct effect on future mortgage rates.
Long-term mortgage rates have steadily increased since January of this year, and Bloomberg News predicts that the rates may soon cross the 9 percent mark.
According to Bloomberg, monthly payments on a 30-year, $200,000 FRM at 9 percent are $131 more than the same mortgage amount at a little over 8 percent, which is what the 30-year FRM averaged at the beginning of this year.
Also according to Bloomberg, monthly payments on a 30-year $200,000 FRM at 9 percent are $345 more than monthly payments would have been in 1998 when the mortgage rate reached a 30-year low at 6.5 percent.
Even Gentry, a graduate of BYU and President of Moneyline Lending, a mortgage brokerage, said that the volume of refinancing loans the company issues has dropped by 20 percent since the beginning of the year. He said they are doing more home purchasing loans and second mortgages now instead of refinancing loans.
Mike Greer, a part owner of Atherton Mortgage in Provo, said that the company's percentage of refinancing loans has decreased by 60 percent ever since mortgage rates have gone above 7.5 percent.
Greer said that rising interest rates have not decreased the volume of home purchasing and construction loans that the company issues, though. He said that the number of these types of loans that the company issue will most likely not be impacted by rising interest rates. It should start to decrease until the fall.