Mortgage rates today are still very low, but borrowers have a very short memory. They tend to forget that the rate on the 30-year fixed, which sits around 3.6% today, was a full percentage point higher a year ago, and above 5% in January of 2010. The purchasing power gained through today"s low rates have arguably helped fuel the recovery in home sales.
Low rates have also sparked a boom in
mortgage refinancing, which in turn has put more spending money
in consumers pockets. Still, the slightest move higher has
dramatic effects. Witness the 10% drop in refinance applications
from a week ago, on the Mortgage Bankers Association"s weekly
report. The rate on the 30-year fixed moved from 3.62% to 3.67%. But rates are now up .375%, and it may hold given MBS/Treasury
market technicals and moderately improving economic fundamentals.
The complacency has a lot to do with rates having be en low enough
to make no-cost refis easy. But when rates rise this much, the
no-cost options go away and people tend to wake up.