There may be a free lunch but you'll pay double for dinner
Rates Rise, Changing Face of Home Sales
By JENNIFER BAYOT
As mortgage rates climb, fewer home owners are refinancing their old loans, and potential purchasers are reconsidering when - or whether - to buy. Their choices could reshape the housing market ahead, economists said, and even affect other spending decisions.
Refinancings, which accounted for more than half of all the home loans last year, are shrinking fast. After three years of easily switching to better terms on their mortgages and frequently taking out cash, consumers can no longer rely so heavily on refinancing to shore up their family budgets and maintain their spending.
The Mortgage Bankers Association said yesterday that refinancing activity fell 17 percent last week to its lowest level since the start of the year, as the standard 30-year mortgage rate has risen to 6.2 percent since flirting with 45-year lows in mid-March. In the intervening weeks, refinancing activity has fallen almost two-thirds.
"What consumers are seeing for the first time is a rapid rise in rates," said Anthony Meola, executive vice president for home loans production at Washington Mutual, a big servicer of home loans.
The sharp appreciation in home prices that consumers have come to rely on for household wealth will probably diminish if rates continue to rise, though the National Association of Realtors estimates that the 30-year rate would have to rise to 8 percent to seriously impede home sales. Rising rates make homes more expensive for consumers and will damp total home sales and home prices.
