Mortgage rates have jumped about a full percentage point in the past three months, ranging from 6.4 percent to 7 percent for a 30-year fixed-rate loan. Experts note that rising rates are making it difficult for the housing market and the national economy to recover. According to National Association of Realtors economist Lawrence Yun, "The housing market needs to recover for the economy as a whole to fully recover." Experts attribute the boost in long-term rates to investor concerns about inflation and to banks attempting to increase their profit margins and minimize risk. Higher mortgage rates make it difficult for home buyers to secure loans, as their debt-to-income ratios and down-payment requirements increase. There also are concerns that more homeowners will end up in foreclosure because they cannot refinance. The one bright side to the housing slump is that home-price declines have improved housing affordability.
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From "Rising Rates Add to Housing Woes"
Christian Science Monitor (06/19/08) P. 1; Scherer, Ron