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My baby sister closed on her house this week. Since she and I are close, she has called me with various updates on the process in the past month or so. Along with area schools, decorating ideas and bedroom sizes, we have also discussed interest rates, monthly payments and FHA loans (she and her husband are first time home buyers).

Despite the fact that rates seem to be going up every time the Federal Reserve meets (they have raised rates 11 times since June of 2004 and have indicated that it’s going to happen again by the end of the year), it’s still a great time (historically speaking, anyway) to be taking the mortgage plunge.

Right now, the average rate for a 30 year fixed mortgage is just over 6%. The Mortgage Bankers Association’s recent long term forecast predicted that it’s going to go from it’s current 6.10% to 6.65% in the fourth quarter of 2006 and up to 6.75% the fourth quarter of 2007. Sounds ominous, right?

Look at the last few decades though. According to an October 2005 article in CNN/Money, the average rate in the 90s was 8.12%, and in the 1980s, it was 12.70%. In October of 1981, interest rates for the average homeowner were a whopping 18.45%! That’s worse than the interest rate on my first department store credit card!

I’m not saying that it’s a great thing that interest rates seem to be swelling every time the Fed meets, I’m only pointing out that it could be (and fairly recently has been) worse.

One Response to “My Sister and Mortgage Rates”

That’s crazy!  At those rate increases, I won’t even be able
to afford the fireplace screens for my
fireplace.  

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