Climbing mortgage rates are sign of new reality

Call it the new writing on the wall: The pace at which mortgage rates have risen recently is startling. (Thinkstock)

WASHINGTON — Where will mortgage rates be a year from now?

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A new reality is setting in on the housing market, with mortgage rates going up. There is a reality check that goes along with that, too: Rates are still very low.

Even so, the pace at which mortgage rates have risen is startling. Before the election, 30-year fixed-rate mortgages were averaging about 3.5 percent. In the weeks since, 30-year rates have jumped above 4 percent for the first time in a year.

One expert anticipates them to be around 4.5 percent this time next year.

That number is “a little higher than what I had projected earlier,” said Lawrence Yun, chief economist at the National Association of Realtors.

“The rate increase since the election has risen much faster than expected,” he said.

A half-percent increase from where current rates are would add about $100 a month to the payment on a $400,000 mortgage.

In theory, mortgage rates could move lower again, but that probably would not be a good sign at this point.

“If the economy was to falter and possibly head into a recession, then interest rates would go down, but they’d be going down for the wrong reason,” Yun said.

The average rate on a 30-year fix is now 4.08 percent, according to Freddie Mac. While that is up sharply from just a few weeks ago, it is also about where rates were at the beginning of 2016, when 30-year rates averaged 3.97 percent.

The record low for 30-year rates was in November 2012, at 3.31 percent.

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