Smart Borrower Blog

Mortgage Rates Break 4 Percent Barrier

Jun 5th, 2013 @ 8:11 PM by Amber Nelson

Long-term mortgage interest rates rose above four percent for the first time in a year-and-a-half, according to the Mortgage Bankers Association (MBA), a move that is likely to bring a rush of buyers into the housing market.

In its weekly survey of mortgage applications, the MBA found that the average commitment rate, excluding points on conventional 30-year fixed rate mortgages grew to 4.07 percent this week, up from 3.90 percent the week before and posting the largest weekly jump since July 2011. The rate has not been above four percent since late 2011.

Jumbo loans, those with balances over $417,000, also saw rates jump up last week, rising to an average of 4.20 percent from 4.07 percent the previous week.

Total mortgage applications were significantly affected by the rising rates, with an 11.5 percent decline from the week before. Refinance applications dropped off 15.0 percent while requests for home purchase mortgages fell 2.0 percent. The refinance share of total applications slipped to 68 percent, down from 71 percent a week ago. That share is likely to continue its descent as a majority of homeowners who can qualify for a refinance have already done so.

An increase in home buying might make up for the drop in refinances, at least temporarily. Higher interest rates signal to fence-sitters that they have missed the bottom of the market and better jump in while rates are still relatively low.

And they are low. Even if they rise a full percentage point in the next year, as is predicted by many economists, they will still be amazingly low and affordable by historical standards. Still, rising rates could deflate the rapidly appreciation taking place in the housing market right now. We could see a large wave of buyers enter the market in the next few months, pushing prices even higher, but then see things level off for a while after the initial rush has passed.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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