This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

What the 'Fear Factor' Means for Your Home Purchase

NEW YORK (BankingMyWay) -- Even as 30-year fixed mortgage rates rise, Americans want to buy new homes anyway -- and that's pushing up the value of homes across the country.

The 30-year fixed mortgage rate shot up more than 200 basis points last week, from 4.51% to 4.72%, according to the BankingMyWay Weekly Mortgage Rate Tracker. One-year, three-year and five-year adjustable-rate mortgages rose sharply as well.

But that's not stopping homebuyers from landing new properties.

That after the National Association of Realtors reports a big jump in existing-home sales, which rose 6.5% in July. All told, the rate of new home purchases was up 17.5% from July 2012 to July 2013.

It's also the 25th straight month of rising monthly U.S. home sales, the NAR reports.

The figures seem to be contradictory at first glance. After all, why would buyers jump into a mortgage market where interest rates are skyrocketing?

But as the NAR explains it, there could be a "fear factor" present, as homebuyers don't want to take the risk of rates rising even higher, thus making any home purchase more expensive.

Look at it this way: According to the BankingMyWay Mortgage Calculator, the total interest on a $200,000 loan at a rate of 4.5% would be $164,813.00 over 30 years.

But a 5% rate would drive that total interest rate cost up more than $186,50 over the same period, adding an extra $22,000 or so to the purchase of the home.

Smart buyers know this and are jumping in now before rates can go any higher, as the recent trend suggests.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,424.85 +162.29 1.00%
S&P 500 1,862.31 +19.33 1.05%
NASDAQ 4,086.2250 +52.0640 1.29%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs