Mortgage rates in the Baltimore metropolitan area are knocking on the door of 8 percent. But is that cause for concern? Will higher mortgage rates begin to choke the area's 2-year-long housing boom?
"I don't believe it for a second," said Marc Witman, president of the Greater Baltimore Board of Realtors.
"People make too much of these barriers," said Robert Van Order, chief economist of Freddie Mac, the government-chartered body that purchases mortgages from lenders and resupplies them with cash to issue new mortgages.
"I don't think the mortgage rate will move much higher than that," said Anirban Basu, director of applied economics for the Regional Economic Studies Institute at Towson University.
So at 8 percent, it seems that people who either observe or make their living in the real estate industry don't think that there will be a dramatic drop in sales.
But they are acknowledging that the market may be moving into a cooling-down period after months of increasing existing-home sales.
On Friday, the Freddie Mac national survey reported that the average 30-year, fixed-rate mortgage rose to 7.89 percent, the highest since May 1997.
Likewise, in the Baltimore area, the 30-year fixed rate rose to 7.89, according to HSH Associates, a New Jersey firm that tracks and analyzes mortgages and whose national average this week was at 8.06.
"Even at 8 percent, the interest rate is still better than most of the time during the 1990s," said HSH Vice President Keith Gumbinger.
The last time a 30-year fixed rate in Baltimore rose above 8 percent was May 2, 1997, when it averaged 8.09 percent.
"Will it take some people out of the market? Perhaps. Will it cause some people to buy less house than what they were thinking of? I think so," Witman said. "But I think, if you look at it historically, housing booms have never been driven by low interest rates.
"We have had some low interest rates during some of the worst sales periods in our history. In the mid-1990s, rates were great, and you couldn't give houses away."
But as rates climb into the 8 percent range, they do affect the home buyer's wallet.
The principal and interest on a $150,000 loan at 7 percent -- where the Baltimore market was last winter -- is $998. At 8 percent, it rises to $1,100 -- a $102 monthly difference. Over the life of the loan, it means an extra $36,700 in payments.
