Burgeoning Interest Rates Threaten to Stifle Recovery

Demand for refinancing shrivels as 30-year rates hit 5.75%

By Rob Quinn, Newser Staff

Posted Jun 11, 2009 7:30 AM CDT

(Newser) – The steady rise in interest rates over recent weeks is threatening to trample the green shoots of recovery in the housing market, the Wall Street Journal reports. Rates on 30-year mortgages hit 5.79% yesterday, more than a point above the 4.75% "trigger" level analysts say spurred the wave of refinancing central to the White House's stimulus plans.

The Fed's efforts to curb the rise have had little effect. Experts believe the higher rates will halve the number of people looking to refinance, although lenders say the take-up rate on a government program to help lenders refinance was disappointing even when rates were at their lowest. "I think the intentions of the government were really good," the chief of one mortgage company said. "But it just hasn't worked that well."

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A sold sign appears on a newly built home in Springfield, Ill. in April, when mortgages rates fell to a 50-year low and briefly boosted home sales. (AP Photo/Seth Perlman)

Bankers say the higher mortgage rates of recent weeks are putting a damper on applications for refinancing. (AP Photo/Kevork Djansezian, file)

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Mortgage rates at these levels will hobble the recovery, and it was just the beginning of the recovery. - Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics

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Burgeoning Interest Rates Threaten to Stifle Recovery