This fact, economists say, is the inevitable outcome of the nation's ballooning debt and the renewed prospect of more inflation as the economy recovers from the depths of the recent recession.
The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 in April, the highest level since last summer. Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 in April, the highest level since last summer. Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.
The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 % by the end of the year.
For young home buyers today considering 30-year mortgages with a rate of just over 5 %, it might be hard to conceive of a time like October 1981, when mortgage rates reached a peak at 18.2 %t. Therefore, this meant monthly payments of $1,523 then compared with $556 now for a $100,000 loan.
No one expects rates to return to anything resembling 1981 levels. Still, for much of Wall Street, the question is not whether rates will go up, but rather by how much. For the complete article see: Complete NY Times Article
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