At least in the short run, the bailout looks like it made it harder to buy a home

Mortgage rates headed to 7%

The rate on a 30-year fixed mortgage has spiked recently, and it may climb higher thanks to the government's massive rescue efforts.


NEW YORK (CNNMoney.com) -- Low mortgage rates have been the one bright spot in an otherwise devastated housing market, but now they're on the rise.

Historically rates are still very low, but experts say they could continue to creep up.

The average interest rate on a 30-year, fixed rate mortgage jumped to 6.6% late Tuesday from 6.06% the Tuesday before, according to Keith Gumbinger of HSH Associates, a publisher of mortgage information.

A borrower with a $200,000 mortgage would pay about $1,207 a month at 6.06%, and $70 more at 6.6%.

Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.

Gumbinger blames the rate increase on the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.


read: http://money.cnn.com/2008/10/15/real_estate/end_of_low_mortgae_rates/

The problem recently has been that banks have totally refused to loan money. That's very very bad.

If they are willing to loan money at higher interest rates, that's a sign of sanity returning. Remember, part of the problem was that credit became too cheap. If it gets more expensive again, that's probably inevitable and arguably healthy. But at least it will be possible to get it.

I do think that pov is of little use to someone looking at the interest rates pricing them out of the market.

Home ownership will continue to drop through the rest of the decade and into next even as houses become cheaper. Credit standards will tighten, and interest rates will rise. In the mid-term (i.e., 4 to 5 years), rates will probably drop back down to the 5% range, which will probably end up being pretty typical. On the other hand, housing prices will have dropped considerably, while I suspect that incomes will be back on the rise. Good news is that 2012-2013 should be a very nice time to get into the housing market, bad news is that's still some years away.

Banks willing to loan at higher interest rates is a recession.

The bigger barriers are that a down payment is now required, and also that the payments are based on fixed rates, not teaser adjustable rates.

It plays a big factor in what the monthly payments will be. The only thing left to bring those down in any significant way would be a larger down payment.

And, it's going to place an even greater burden on those folks stuck with a variable rate.

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So as long as credit is available, some of this works itself out in the wash.

Consider a $250,000 house. Previously you could finance the whole thing, possibly with a 3% teaser rate for the first 3 years. So your payments were a little over $7500 / year for the first 3 years.

Now you have to put $50,000 down.

Then the 6% on the $200,000 that you finance is a little over $12,000 per year (on a 30-year, you are paying down hardly any principle during the first years -- it almost all interest).

Of course, don't forget insurance, flood insurance if you are in a flood zone, and the ever-increasing property tax.

on home loans.

You're talking about well over a decade ago. I guess we can always do worse, but my point is, this fix isn't making home ownership more affordable, at least in the short term.

to afford the payments. People with good credit who want to buy a house, will do so. It just will be a less expensive one. People were still buying houses in the early 90's and in the 80's when it was 10% or so.

I don't take the view that folks' resources are infinitely flexible or that there is some spread of cheap homes waiting in the wings. Remember, the sellers are hindered by the higher interest rates as well.

doesn't need to slow down and recover a bit.

on a land contract that started at 9% and went up a half a point each year for the next three years. But it was a smaller house in a lower-income area of a higher income school district, and we put 20% down. And the land contract (and the rate) was truly a "gift" from the seller (he liked us and wanted us to have it, and was willing to work with us), as my husband had just started his full-time job at the college, and my income wasn't enough to qualify us for a loan at the going rate of around 9.5%. But we were able to get a "regular" 15-year mortgage loan (i.e., from a bank) in the second year at somewhere around 8% (don't remember exactly), and then refinanced again at 6.5 a couple of years later.

The point being, yes, people will still buy houses at higher rates, but they really will have to be "well qualified" in terms of income and the ability to put some money down.