Best mortgage interest rate just got worse

The Wall Street Journal reports that the average mortgage interest rate for a 30-year fixed mortgage just jumped up to 5.44%.  That is a fast jump.  It was only a few weeks ago that the average rate was just over 5% and the best mortgage interest rate for 30 year fixed was as low as 4.5%.

One banker estimates that a 1% increase in interest rates is equivalent to a 10% increase in the cost of a home, so this will make it harder for people to afford homes and may impact sales.  It will certainly put a damper on the refi market which has been enjoying a big rebound since rates went down.

At the same time, defaults and foreclosures have set new records.   The Mortgage Bankers Association reports that about 12% of first mortgages are overdue or in default, the highest number they have ever recorded.  Almost half of subprime adjustable rate loans are overdue or in default.

For more information on getting the best interest rate on your mortgage, check our archives.  This section was written before the bubble burst but the advice is still current.  Some things do not change.

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