WASHINGTON — The era of record-low mortgage rates is over.

The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in just the past week. As mortgages get more expensive, more would-be homeowners are priced out of the market — a threat to the fragile recovery in the housing market.

And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.

Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.

For people putting their homes on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their purchases and lock in something decent before rates go even higher.

“We are seeing some panic among potential buyers who have not found houses yet,” said Craig Strent, co-founder of Apex Home Loans in Bethesda, Md. “They’re saying: Man, I should have found a house three weeks ago or last month when rates were lower.”

Advertisement

It’s all about affordability. For every percentage-point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors. The rule of thumb is that every one-point increase reduces a buyer’s purchasing power by about 10 percent.

For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.

As of Wednesday, the Mortgage Bankers Association put the national average for a 30-year fixed-rate mortgage at 5.31 percent. One week ago, it was 5.04 percent.

Many analysts forecast rates will rise as high as 6 percent by early next year. If they go much higher, the already shaky housing recovery could stall.

 


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.