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Mortgage Rates Spike This Week

Bankrate chart shows spike

MORRO BAY — The San Luis Obispo real estate market is booming in 2013, but uncertainty about the future of Federal Reserve stimulus policy unleashed after Wednesday’s FOMC meeting has resulted in much higher mortgage rates says a local lender. Central Coast Lending of Morro Bay put out a news release today that suggests that  rising rates threaten to curtail the real estate recovery or maybe not.

“In the past 24-hours, the slumping bond market has moved the 30-year fixed mortgage rate from 3.625% (3.722% APR) up to 4.000% (4.097% APR). Controlling for situation, the difference in monthly mortgage payments for the two rates is about $90.

It was a difficult day for people actively engaged in mortgage transactions who have not locked their interest rates. The jump reduces real estate affordability and has the potential to slow the accelerating recovery on the California Central Coast.

Now for some measure of good news: we believe that market’s reaction to the FOMC meeting and Federal Reserve Chairman Ben Bernanke’s press conference was completely off base, and speculation about the imminence of the “tapering” of Fed stimulus policy (quantitative easing) is overblown.

We would expect to see mortgage rates to drop back again once everything calms down. However, if we don’t see downward movement, the effect on the accelerating local real estate recovery (13% to 20% median home price growth in the past 12 months) could be troublesome.”

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