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U.S. mortgage interest rates jump to 7.16%, highest since 2001

reuters.com

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Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#31

Post by lotsofpulp »

montzark wrote: post #14
mysterydip wrote: post #3

The article says rates have more than doubled since the beginning of the year. Uaing a mortgage calc for $400k and 20% down: 3.58% = $522k, or $202k in interest 7.16% = $778k, or $458k in interest

There is nuance that interest changes over the period of the loan. In or so 2007 some people took 5% Euribor + margin loans, but only some years after it was negative. And since negative euribor was not written to contracs some paid less interest than was margin.

In the US, 90% of loans are fixed rate for the entire term.

https://twitter.com/RickPalaciosJr/status/150811381352611430...

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#32

Post by dont__panic »

bfrog wrote: post #5

This will pressure prices down presumably which is a good thing for cash buyers but basically no one else.

It's also good for buyers with low net worth, but high yearly income. I got into the tech world 5 years ago, fresh out of college. Many of my peers can afford monthly payments of $2-3k... but getting your hands on $100k cash for a 20% down payment takes time, even at decent income levels.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#33

Post by gedy »

montzark wrote: post #14
mysterydip wrote: post #3

The article says rates have more than doubled since the beginning of the year. Uaing a mortgage calc for $400k and 20% down: 3.58% = $522k, or $202k in interest 7.16% = $778k, or $458k in interest

There is nuance that interest changes over the period of the loan. In or so 2007 some people took 5% Euribor + margin loans, but only some years after it was negative. And since negative euribor was not written to contracs some paid less interest than was margin.

Not typical in the US where many/most? mortgages are fixed rate for the entire 30 years

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#35

Post by ren_engineer »

khuey wrote: post #17
rossdavidh wrote: post #7

If rates go from a low of 2% up to, say, 9%, then in order to keep the mortgage payment the same, the price of a $400,000 house would have to drop to around $230,000. This assumes a 30-year fixed rate mortgage, and the details will vary depending on money down, etc. but the basic fact remains that house prices will need to fall by a lot, down to levels of 5 years ago or more, before the current interest rate hiking c…

A lot of people simply won't sell in that situation which is going to further constrain supply.

you think people are going to pay mortgages they are massively underwater on?

This also ignores the fact that the Fed's stated goal with raising interests rates is to increase unemployment to slow inflation. You are already seeing the results in quarterly financials. Once layoffs start happening people won't have an option but to sell when they can't make payments

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#36

Post by refurb »

conception wrote: post #27
khuey wrote: post #17

Earlier quoted context omitted.

A lot of people simply won't sell in that situation which is going to further constrain supply.

There isn’t a supply issue. There is a corporations buying property issue.

So too many buyers and not enough houses?

Sounds like a supply issue.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#37

Post by diogenescynic »

conception wrote: post #27
khuey wrote: post #17

Earlier quoted context omitted.

A lot of people simply won't sell in that situation which is going to further constrain supply.

There isn’t a supply issue. There is a corporations buying property issue.

You've got it backwards. The bigger issue is that we aren't building new supply to meet demand. Corporations buying property is only an issue because we've stopped/slowed new home development/supply to not keep up with demand. Allow supply to meet demand and the corporations don't have a market to monopolize. This is the law of supply and demand 101.

But the same people that are usually against corporations buying properties, are usually against new home development and increased housing density. I saw many housing activists in the Bay Area who were against new housing at market rates and thought all new housing should be at below-market-rate prices--which simply isn't possible.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#38

Post by falcolas »

I saw someone point out that this interest rate hike will effectively nullify any bubble breaks. House prices could drop over 30% (the amount it dropped in the last housing bubble popping) and the monthly mortgage payment will still be more than it was before.

A terrible time to be looking for a house.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#39

Post by ghastmaster »

_huayra_ wrote: post #26
khuey wrote: post #17

Earlier quoted context omitted.

A lot of people simply won't sell in that situation which is going to further constrain supply.

This is another thing people don't consider: housing is priced at the margin. One house has to sell in the neighborhood because of divorce / death / etc, and boom you have the one comp that everything else is tied to. Even if they stay in their home, people over-levered on their fake housing equity through HELOCs are in trouble.

You are very correct. HELOCs, however, are not as big a factor as they used to be. They will become more popular though.

Wolf Richter shows some nice graphs in the article linked below. He states that mortgages in Q2 were $11.4T and HELOCs a mere $320B.

https://wolfstreet.com/2022/08/04/trip-back-to-reality-start...

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#40

Post by htrp »

skapadia wrote: post #34
ed25519FUUU wrote: post #22

There’s a ticking clock right now for 5/1 ARM. If rates stay elevated then many are going to be out of a home.

Sure, but who was opting for an ARM in the last 5 years?

You would be surprised.... a lot of flippers and even non-flippers betting on the ability to easily refi 5 years out.

Publicly reported data:

https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-dem...

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