Mortgage Rates Climb Higher

Mortgage rates had to climb. Everybody knew it. The ability to borrow for 30 years at a fixed rate below 3.5% was simply too good to be true.

Earlier today, Freddie Mac released its weekly estimate of the average interest rate on a conventional 30-year fixed mortgage. While it came up short of the staggeringly high rate recorded at the end of last week, it nevertheless showed that the days of sub-4% mortgages are very likely in the rearview mirror.

According to Freddie Mac, the benchmark rate climbed by 22 basis points to 4.51% from 4.29% the prior week.


At first glance, the market's reaction to this news was perplexing.

One would have assumed that homebuilders' stocks would have been hammered, as they were last week. Yet, precisely the opposite has occurred. D.R. Horton is up by 8%, PulteGroup by 7.5%, and Lennar by 8.2%.

The explanation for this apparent paradox is twofold. In the first case, as I noted, the 4.51% rate, while higher on a sequential basis, is much lower than the 4.75% rate estimated by a widely followed industry publication last Friday.

And in the second case, the comments by Federal Reserve chairman Ben Bernanke after yesterday's closing bell have been interpreted to mean that the central bank is not as inclined to taper its support for the economy as many have feared since the end of May.

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The article Mortgage Rates Climb Higher originally appeared on Fool.com.

John Maxfield has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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