Recs

2

Why Rising Mortgage Rates Are Overblown

Rising mortgage rates have plagued the housing market for months, having an impact on home affordability and leading some to predict the end of the housing market's recent rebound. But are would-be homebuyers overreacting to the rise in rates?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about rising mortgage rates and why their effects have been overblown. Dan notes that refinancing activity has slowed considerably, hurting overall profitability at lenders Wells Fargo (NYSE: WFC  ) and JPMorgan Chase (NYSE: JPM  ) , but that even if rates hadn't gone up, refinancing likely wouldn't have continued much longer even in a flat rate environment. Moreover, for homeowners considering a new purchase, the latest three-quarter-point rise has pushed up borrowing costs by roughly $100 per month on a $250,000 mortgage loan.

Dan goes on to point out that incentives from Lennar (NYSE: LEN  ) and other homebuilders are offsetting some of the higher financing costs for would-be home-buyers. He closes by discussing the bigger risk of soaring home prices on the market, noting that mortgage-insurance providers Genworth Financial (NYSE: GNW  ) and MGIC Investment (NYSE: MTG  ) face the long-term challenge of avoiding the same deterioration of loan quality that led to their big losses during the financial crisis.

Will higher mortgage rates crush banks?
Many investors fear that higher rates could really hurt the industry, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.


Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 09, 2013, at 11:13 PM, TheShadow wrote:

    I guess there is a good reason why it is called Motley's "Fool"

    Let's assume he is right it only costs $100.oo per month. So, that would be $100.00 X 12 which only comes to and extra $1,200.00 the bank gets for doing nothing but raising it's rates. Now let's take that one more step, take that $1,200.00 and multiply it for 30 years, let's see now that comes to, uh, oh yeah, $36,000.00!

    That's $36,000.00 that the banks get of your hard earned money, for doing absolutely nothing other than saying we want it, and if you want to buy a home you have to pay it.

  • Report this Comment On November 11, 2013, at 12:26 PM, huntergnr wrote:

    I'm in the process of purchasing a home and my lender told me that the biggest farce in the industry is that the prime rate is tied to mortgage rates - he said it's completely not true. I did a little research on it and found several instances where what he claims is true. Anyone know the truth?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2720280, ~/Articles/ArticleHandler.aspx, 9/1/2014 10:39:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 2 days ago Sponsored by:
DOW 17,098.45 18.88 0.00%
S&P 500 2,003.37 6.63 0.00%
NASD 4,580.27 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/29/2014 4:05 PM
GNW $14.19 Up +0.13 +0.00%
Genworth Financial… CAPS Rating: ****
JPM $59.45 Up +0.29 +0.00%
JPMorgan Chase & C… CAPS Rating: ****
LEN $39.18 Up +0.23 +0.00%
Lennar Corp CAPS Rating: **
MTG $8.43 Up +0.11 +0.00%
MGIC Investment Co… CAPS Rating: **
WFC $51.44 Up +0.29 +0.00%
Wells Fargo CAPS Rating: ****

Advertisement