Over the past few weeks, mortgage rates have spiked, sending potential homeowners shrieking through the streets in uncontrollable panic.

Okay, that last part might be a bit of an exaggeration, but you'd never know it by reading the mainstream media. Don't believe me? Google the term "mortgage rates spike" and you'll have more than enough material to last you through the summer.

The reality is that yes, mortgage rates have gone up. And yes, they've gone up a lot from where they were two months ago. But should you, as either a potential home buyer or home seller, be concerned? In a word: no.

All Good Things Must Come to an End

What's lost in the discussion about the recent rise in mortgage rates is what it says about the broader economy.

Two months ago, the interest rate on a 30-year fixed-rate mortgage was 3.35 percent. Not only was that cheap, it was historically cheap, like, once-in-a-lifetime cheap. Never before, and perhaps never again, will we see rates sink to such a ridiculously low level.

Why were they so low? Because the Federal Reserve, which has been putting downward pressure on mortgage rates since last September, had no confidence in the economy.

If anything, then, the fact that they are rising -- at the behest of the central bank, I might add -- can only mean one thing: The economy is getting better.

The Housing Recovery Won't Be Thwarted

The biggest concern is that rising rates will put a damper on the housing recovery and therefore be bad for people who are trying to sell their homes. The fact that this is transpiring during the prime selling season only adds to this fear.

But here's the thing: The impact on the housing market will likely be much less than one might think.

The vast majority of mortgages that have been underwritten over the past few years have been to people who are refinancing existing homes, not to people looking to buy new ones. As a result, when mortgage rates rose, the former dropped off considerably more than the latter.

According to the Mortgage Bankers Association, the volume of applications to refinance mortgages has dropped by 53 percent since the beginning of May. Meanwhile, the volume of applications for purchase-money mortgages has declined by only 8 percent.

In other words, the impact on the demand for new and existing homes has, at least thus far, been comparatively muted.

To be fair, the same cannot necessarily be said for prospective homebuyers. If you fall into this category, it can't be denied that you missed an opportunity to get a mortgage at an interest rate that we may never see again.

At the same time, mortgage rates are still ridiculously cheap. The most recent national average puts the rate for a 30-year fixed-rate mortgage at 4.51 percent. As the Wall Street Journal noted, even at a 5 percent interest rate, housing is still affordable by historical standards.

Ask anyone who bought a house before 2010 what they think of that rate. "Jump all over it," they'll say. Prior to last year, that would have been the lowest rate in recorded history. And chances are, the same will be true going forward.

Yes, mortgage rates have spiked. But let's keep those increases in perspective.

John Maxfield is a contributing writer to The Motley Fool.

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14 Comments

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JoJo

yeah well I am pissed as I am being not only priced out once again do to home prices rising(happened to us 10 years ago with the fake boom) but just a week ago I was quoted at 4.37%, this week 5%, that is ridiculous and brings my monlthy payments up aproxx. $75.00 or more. 6 weels ago I was told my rate was 3.78%, (we were outbid) that is way to much for such a short period of time. Funny I still see tons of shortsales and foreclousures and know many friends and family out of work but yeah the ecomomy is getting sooo much better..I am pissed as we were at the top ouf our comfort zone before this sudden rise in rates..now we just back out of buying, it was out last shot, we are in our 50's and will not put down our hard earned savings to such a still very volitil market! dam I am pissed!

August 16 2013 at 9:35 PM Report abuse rate up rate down Reply
Mike Wasauski

The best thing anyone that wants a loan can do is research the lender.
Mortgagecrooks.com gives us everything we need to find out if the lender has had prior problems or complaints.

July 16 2013 at 4:42 PM Report abuse rate up rate down Reply
moretrorun

The bank bailouts will be forthcoming as money for the high interest CDs to come will come from the low interest rate mortgages. But in the meantime, its the free market, right? After all, rates have been held down artificially for too long. It was just a matter of time. There's more to come. And if it causes prices of houses to drop to keep payments in line, it's the free market, right? Prices have been kept artificially high for too long.

July 15 2013 at 2:12 PM Report abuse rate up rate down Reply
Frank and Barbar

It is a good thing for interest rates to rise. Banks do Not want to loan money at such a low rate. They will not make enough money on the deal, so I have been told. If you could get a loan from a bank, you are very lucky. Now that interest rates are rising, maybe the banks will loosen their grip on the money that they have been hoarding and start to lend again. That is the reason the Fed. bailed them out in the first place.To keep money flowing into the economy.Lending from banks will lead to increased spending and thus require more people to be hired to meet the demand.

July 15 2013 at 12:38 PM Report abuse rate up rate down Reply
mdennish

I refinanced my house in 2012 for 4.6% with no point fees or closing costs and I am happy with the terms.

July 15 2013 at 11:44 AM Report abuse rate up rate down Reply
tmlbtb

The large metropolis' are selling houses fast, but small town America is still struggling. The jobs aren't there. I think the Fed made a mistake, letting the rates rise. Once the impact that small town America isn't doing as well as the rest of the country, this so called "recovering economy", the house of crads will collapcse once again.

July 15 2013 at 11:07 AM Report abuse -2 rate up rate down Reply
1 reply to tmlbtb's comment
JoJo

I couldn't agree more!!!!!!!!!!!!!! touche'

August 16 2013 at 9:44 PM Report abuse +1 rate up rate down Reply
mlfertig

I get such a kickout of people worrying about mortgage rates rising .
We bought our first house in 1990 an a good rate at the time was about 10%.
10 years later they were about 7.5% and another 10 years down to about 5%
So even if they go up to 5% that is still a great deal

July 15 2013 at 9:47 AM Report abuse +1 rate up rate down Reply
elendil3136

The business media never act without overreacting, and never report without at least a mild undertone of panic. Today's home interest rates are the lowest anyone over fifty have ever seen. If I were in the market for a new house, I would be jumping for joy at the prospect of a 30-year loan for less than 5%.

July 15 2013 at 9:27 AM Report abuse +1 rate up rate down Reply
hduplease

affordable for who, look how many americans are unemployed, how many are working in places like walmart or micky d. ok houses have gone up fast and rates are rising, how many are priced out of the market with ever .25 percent increase, gas prices jumped 20 plus cts in two days, another factor you have to consider when buying. until real jobs return to america roughly half of america cant affort a house,

July 15 2013 at 8:12 AM Report abuse rate up rate down Reply
2 replies to hduplease's comment
oldschool

Besides having the federal reserve pump trillions into bonds and government projects very little was done by this administration for the private sector to expand and invest. Actually they sent out a negative message to the private sector, not a way to improve the economy. Romney was the choice folks, he knows business, the democrats only know Government and TAXES !

July 15 2013 at 8:38 AM Report abuse -3 rate up rate down Reply
2 replies to oldschool's comment
rich_paddlyrich

Romney knows how to pay as little in taxes as possible, knows how to ship American jobs over seas, If he had won Romney would've given a trillion dollar tax cut for the rich

the republicans only know how to allow the rich to pay as little as possible in taxes while the middle class end up paying more in taxes than the rich.

July 15 2013 at 9:12 AM Report abuse +3 rate up rate down
pdbliz

old school,,,,,,,,,,I SEEN YOU KNOW THE TRUTH....

WHO IS BUYING.???? THE GOVERMENT YOUTH ARE BUYING....
......WELFARE PEOPLE ARE BUYING,,,,,,,,,..AVERAGE PEOPLE CAN NOT BUY.!!!

July 15 2013 at 9:34 AM Report abuse -3 rate up rate down
JoJo

you are 100% correct, we are a family being priced out once agian as home prices are rising along with mortgage rates, our quote for the rate went up over half percent in 2 weeks! sucks! Rminds me of the fiasco form the early 2000's when things went crazy :P

August 16 2013 at 9:48 PM Report abuse rate up rate down Reply