Mortgage interest rates have been rising on signs that the U.S. economy is improving. Last week, the 30-year fixed rate reached the highest level in more than six months, climbing to an average of 3.63%, compared with 3.52% the previous week and 3.92% a year earlier. The current rate is the highest it's been since the week of Aug. 23 when the 30-year fixed rate averaged 3.63%, according to Freddie Mac. With economic prospects improving, rates could rise even higher this year. This increase could mathematically make buying a home more expensive, but it's unlikely to stall the housing recovery. To the contrary, higher rates could actually support it. For the past few years, mortgage rates have sunk to new lows as the Federal Reserve continues to buy up hundreds of billions of dollars worth of bonds. The policy is meant to get everyone from investors to consumers to borrow and spend more. While it has driven many homeowners to refinance existing home loans, it hasn't spurred nearly as many mortgages for home purchases. In 2012, refinances made up 71% of all mortgage originations, according to the Mortgage Bankers Association, a group that tracks mortgage rates and home loan trends.
from Fortune Magazine