Rising interest rates can be a good thing for several different reasons.

• Right now people have a false sense of a high mortgage rate. Just a few short years ago 6% was a good rate. We have been spoiled with historically low rates that could not last forever. Even though rates are rising, they are still low.
• If you are a seller, the rising rates and the rising home prices are getting buyers to finally start buying. Buyers realize that the time of the great deal is over and they need to buy now to still get a good deal.
• The loan back up will start ending. So many people were refinancing and that combined with new mortgages had the loan industry all backed up. The rising rates will keep most from refinancing allowing more time for new purchase mortgages.
• Rising rates are a sign that the economy is improving and is also a good sign then for the housing market.

Last week mortgage rates rose to over 4% for the first time since March 2012!  The average rate for a 30 year fixed rate mortgage is 4.46%. This rise in interest rates will most likely send more buyers out into the market to get a home before rates climb even higher making the homes for sale shortage even greater. On the other hand for some buyers, they may need to adjust the price of homes they are looking at since they are becoming more expensive with higher interest rates.

The number of refinancing applications was down another 5% last week – a plunge of 40% since just back in May!  For many homeowners, a refinance just is no longer worth it if rates are 4% or more.

With the low interest rates many homeowners are still thinking about refinancing to lower their monthly mortgage payments.  While this seems like a great idea, there are some things to consider before you embark on this path.  Refinancing is not cheap – have you looked into what it will cost you? How long will you be staying in your current home? If you are moving soon, you most likely won’t recoup the cost of the refinancing.  Does your current mortgage have a pre-payment fee?  To get the exact costs of refinancing please check with your mortgage banker but I have a short list of some of the costs that you will need to consider.

• An application fee, as high as $300, which is non-refundable if you change your mind or are denied
• The loan origination fee which can be up to 1.5% of the loan principal
• Appraisal cost which usually runs $300-$700
• Closing fees which can be as high as $1000
• Title search and insurance which can also be up to $1000
• You may need a survey which typically runs several hundred dollars
• If your current mortgage has a prepayment penalty, you will have to cover that as well and it can be anywhere from 1-6 months of interest payments

Refinancing is a wonderful idea with the low interest rates but you do need to find out the costs and see if it is worth your while or not.

For the week ending March 29, mortgage applications for home purchases were up almost 7%, but this was most likely driven by the increased cost of an FHA mortgage starting April 1.  Overall mortgage applications for home purchases are up about 4% over last year, while refinancing applications are starting to decline.  With the increases in home sales the 4% increase in mortgage applications is to be expected. Refinancing applications are also expected to decline as interest rates slowly start to inch upwards.