Mortgage Rates Jump To Highest Level In Years
by Betsy Jibben, Reporter
August 22, 2013 10:52 PM
Major banks are laying off mortgage workers as interest rates hit their highest level in two years.
A spokesman for Wells Fargo says the company has to lay off workers because the demand for refinancing has dropped from earlier this year.
The average rate on the 30-year fixed loan jumped to 4.58 percent. That’s up from 4.40 percent last week. While some rising rates may sound like bad news for someone borrowing money, some experts say there's a positive side to the rates going higher.
Despite the increase in mortgage rates, rates are still low compared to ones in the past.
"This isn't that big of a change, rates are still historically low, it's still a great time to buy," said Augustana College Professor of Economics, Reynold Nesiba.
Doctor Reynold Nesiba, Professor of Economics at Augustana College did the math.
Let's say you want to buy a $150 Thousand house. He compared how much you would have paid last week and how much more you would pay today with the increasing mortgage rate on a 30-year fixed loan.
“That would mean the difference between $767.17 and $751.14. It’s a difference of about $16 a month,” said Nesiba.
It might not affect just mortgage rates, but other interest rates like getting a new car or buying furniture. While rising rates might sound like bad news to the borrower, Nesiba says a reason the rates could be going up is because the economy is getting stronger and is expected to improve.
"Interest rates are going to be higher in the future because we expect income to be higher in the future,” said Nesiba.
Since it's hard to determine what rates could be in the next 6 months to a year, buying a house with the new increase still isn't a bad investment.
"If you're comparing what interest rates are now compared to what they can be in a couple of years from now, it's better to take out that 4.58 percent interest rate now than some higher rate in the near future,” said Nesiba.
Professor Nesiba says he confident interest rates will go up even higher in the future, which affects someone who is thinking about getting a home right now.
Also, if you have an adjustable rate mortgage, these higher rates could affect your payments. Banks can charge different rates to borrowers based on their credit scores, credit history, and work history. Even with the rate changes, lenders say you still want to make sure you have good credit.