Rising mortgage rates hurt buyers, builders

It hasn’t gotten this consistently more expensive to borrow money to buy a house since the early 1970s.

Certainly, mortgage rates were higher four and a half decades ago, but the march higher this year rivals the steady increases back then. Freddie Mac finds home borrowing rates have risen 16 of the past 22 weeks.

While the average 30year fixed rate mortgage dipped slightly in the past week, the trend bears watching for investors in the week ahead. Already this year the drive higher means borrowing money to buy an average priced home in America now costs $20,000 more over the lifetime of the loan compared to borrowing that money in January.

As mortgage rates have risen, the stocks of homebuilders have fallen. Shares of Lennar, KB Home and Toll Brothers are down about 20 percent each since the beginning of the year.

Few veteran homeowners will complain about a 4.5 percent mortgage rate. That’s still cheaper than borrowing costs just 10 years ago. But there are plenty of indicators bor- rowing costs will continue rising.

First, the Federal Reserve plans on continuing to hike its interest rate. In the minutes for its May meeting, the policymakers “expected that economic conditions would evolve in a manner that would warrant further gradual increases” in its short-term interest rate. Second, persistent worries about inflation, and its cor- rosive effect on bond investments, have helped push market interest rates higher.