Tuesday, June 11, 2013

Are higher mortgage rates impacting housing?

As mortgage rates in the US reach the highs not seen since early 2012, many are asking the key question: would this rise in rates impact the housing market or consumer sentiment?

So far the only effect we are seeing is a decline in refinance activity - which has always been volatile. The Purchase Index however continues to show elevated mortgage activity that results from house purchases.

Source: Mortgage News Daily

The markets are also not anticipating the mortgage rate increases to have a major impact on the housing sector. Homebuilder shares, having taken a bit of a beating in recent days, are still massively outperforming the broader indices.

Source: Ycharts

Some analysts are warning however that if the 30-year mortgage rate rises above 4.5%, all bets are off and the housing market will begin to feel the effects.

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