NEW YORK (CNNMoney.com) -- The era of near 4% mortgage rates has ended after a quick rate rise since early November. But some industry experts think that may be a good thing for the flagging housing market.
The average 30-year fixed mortgage rate has risen to 4.86% from 4.17%, according to Freddie Mac's weekly mortgage market survey. In the Bankrate.com weekly survey, the rate has risen to 5.02% -- crossing the 5% mark for the second time in three weeks -- after being as low as 4.42% as recently as early November.
Rates haven't been this high since May and forecasters now predict them to remain between 5% and 6% for all of 2011.
"You can kiss those record lows goodbye," said Greg McBride, chief economist for Bankrate.com.
Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.
"I don't think we're going back to a 50-year low anytime soon without an economic collapse," he said. "Rates will probably never revisit those levels."
The increase will push mortgage payments higher for homebuyers. When rates rise from 4.25% to 5% it takes away about 9% of buying power, according to McBride.
"That's nothing to sneeze at," he said. "But it's still small relative to the steep drop in home prices over the past few years."
"The initial phase of an interest rate increase generally does not hurt markets," said Lawrence Yun, chief economist for the National Association of Realtors. "In fact, it can help."
The rapid rise introduces an element of urgency for potential homebuyers. They may now rush to buy before rates spurt even more.
The strength of the economic recovery will have far more impact on the housing market that this relatively modest increase in mortgage rates, according to Yun. If hiring gains momentum, housing markets should revive.
"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," said Yun.
Gumbinger said that demand for homes may be tempered somewhat by the increased mortgage costs and so affect home prices a bit but the improving job picture and better consumer confidence matter much more.
"If the other factors are aligned," he said, "interest rates are not a big thing."
The real mortgage challenge, according to Yun, is to increase the number of loan applicants winning approvals. Too many potential homebuyers are still finding it difficult to qualify for loans.
"The current mortgage market is a unique situation" he said. "It's less about rates than it is about underwriting standards, which are, in my opinion, still too stringent."
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.85%||3.94%|
|15 yr fixed||3.03%||3.04%|
|30 yr refi||3.93%||3.99%|
|15 yr refi||3.12%||3.13%|
Today's featured rates:
The historically black school will cover 50% of the cost of a a student's final semester if they graduate early or on time, starting next year. More
House of Cards' season 3 starts with Frank Underwood trying to pass a bogus economic policy More
Startup HEAL promises a doctor at your doorstep in under 60 minutes, for a flat fee of just $99. More
In Buffalo, New York, the city is selling vacant homes for a $1 to those who are willing to fix them up and live in them for a few years. But as many buyers soon find out, the cost to renovate these super cheap properties can quickly add up. More