Tax Return Deadline and the End of Cheap Money April 14, 2006
Congratulations on Finishing your Tax Returns…That is unless you have yet to finish them. If you haven’t finished your tax returns, you have until Monday to send them off. Check out Bankrate.com’s 10 things to check before you send off your return. If you have completed them, congratulations! Take the weekend to relax, or go out for dinner.
Not to spoil your tax celebrations, but it looks like the era of cheap money may finally be nearing its end. Today’s NY Times article today shows why borrowers will soon be paying more on mortgages and home equity loans, even though economists have struggled to explain why long-term interest rates have remained relatively low, given the government pushing up interest rates by increasing its benchmark short-term rate, now at 4.75 percent.
Driven by a stronger economy and a nearly two-year money-tightening campaign by the Federal Reserve, the rising level of interest rates across the board is expected to have the biggest impact on people who took out home loans with low introductory interest rates that are set to adjust in line with market rates in the next few years…
The Mortgage Bankers Association estimates that the burden of higher interest costs would fall on about 7 percent to 8 percent of all homeowners. The rest have either paid off their mortgages or face no immediate increase because they took out fixed-rate mortgages or refinanced their earlier loans to mortgages that hold rates steady for 5 to 10 years.
At the same time, new homebuyers will be paying more.
The average national 30-year fixed mortgage interest rate was 6.43 percent last week, up from 6.21 percent at the start of the year and 5.71 percent at the start of 2005, according to Freddie Mac. The introductory interest rate on a five-year adjustable-rate mortgage was up to 6.11 percent, from 5.78 percent in January and 5.3 percent a year ago.
(mortgage chart courtesy of Bankrate.com, as of 4/14/06)
Source:
Treasury Rate Signals Burdens for Borrowers
By VIKAS BAJAJ, New York Times
Published: April 14, 2006
- Posted in : Economy
- Author : Kyle
Comments»
[…] You’ve seen all the media attention about how mortgage rates are rising and homeowners are either locking in rates before they go up or refinancing mortgages from adjustible to a fixed rate. A quick check of mortgages shows that a standard 30 year fixed rate is only 8 basis points (0.08%) higher than last month’s rate. […]