Higher Interest Rates a Sign of Economic Recovery?
Higher Interest Rates a Sign of Economic Recovery?
Mortgage interest rates rose in the latest week, and according to Freddie Mac the root cause was economic data indicating housing market recovery.
“Mortgage rates rose slightly this week amid positive economic news that the economy may be approaching the bottom of the recession,” said Frank Nothaft, Freddie Mac vice president and chief economist.
Specifically Nothaft named the following indices:
- April consumer sentiment was revised above market consensus
- The ISM Manufacturing Index ‘exceeded market expectations’ in April
- Fed Chairman Ben Bernanke predicted the economy will bottom out soon before heading up at the end of the year
- Pending home sale rose for the second consecutive time in March
- Demand for prime mortgages rose in April for the first time in two years
Based on those factors, rates on interest rates on 30-year fixed rate mortgages increased to 4.84 percent in the latest week, excluding fees, up from 4.78 percent.
Not everyone is convinced that the week’s news are true signs of renewed market strength. A post on the http://www.thetruthaboutmortgage.com/mortgage-rates-rise-on-good-news saw it this way:
“But these two items [pending home sales and increased prime demand] can easily be attributed to the sale of distressed properties and the record low interest rates pushing demand higher, which to me isn’t the sign of a recovery.”
Personally, I tend to agree more with Freddie Mac, though. It has been a long time since we have seen so many positive indicators in one week, and the market and our entire economy seems to be very sensitive to general positive or negative feelings about the state of things. So, maybe things might actually be looking up, and with rates much lower than the 6.05 percent from this time last year, home loans are still very affordable…for those who qualify.
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