Rising mortgage rates: Effect on monthly payments

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In the largest spike in 26 years, mortgage rates jumped this week -- from 3.98 percent to 4.46 percent -- thanks to the Federal Reserve's announcement last week that it could start reducing its purchases in the bond market.

Fixed-rate mortgages have increased by a half a percent since last week. The 30-year fixed-rate mortgage stands at 4.46 percent, up from last week's 3.93 percent, reaching the highest rate in two years, according to Freddie Mac's mortgage survey.

The rates on 15-year mortgages rose from 3.04 percent last week to 3.5 percent -- the highest rates since August 2011.

The steep incline in interest rates appears to be a direct reaction to Fed Chairman Ben Bernanke's remarks on June 19 that the Fed could slow down its bond purchases as early as this year and completely halt them by mid-2014.

Since the announcement, Treasury bond yields have jumped, and mortgage rates followed, said Frank Northaft, vice president and chief economist at Freddie Mac.

The Fed's $85 billion-a-month in bond purchases helped drive mortgage rates to their lowest point ever late in 2012, and it has helped keep mortgage rates hovering near record lows this year.

Homebuyers will be hurt by such huge leaps in interest rates. For example, a $165,000 30-year loan obtained with last week's 3.93 rate will cost $786 per month. Under the new 4.46 percent rate, that jumps to $832 per month. That's a $46 monthly increase -- or a whopping $16,560 over the life of the loan.

For a $300,000 30-year loan, the rate increase comes to an extra $92 per month, or $33,120 extra over the life of the loan -- that's definitely not pocket change.

The increased rates could create a rush to buy homes, which would drive both housing prices and mortgage rates higher, said Rick Allen, senior vice president of Mortgagebot and a 25-year mortgage specialist.

"On the other hand, there are forces in place to keep things from getting out of hand," he said. "People have learned that home prices can fall drastically, so they should be more inclined to be rational about not paying a price beyond their means."

New lending standards also help to keep buyers purchasing within their means, but pose challenges for homebuyers who want to purchase but just can't cut it under tightened standards.

Mortgage rates for the week ending June 26:

A 30-year FRM averaged 4.46 percent, with an average 0.8 point, up from last week when it averaged 3.93 percent. Last year at this time, the 30-year FRM averaged 3.66 percent.

A 15-year FRM averaged 3.50 percent, with an average 0.8 point, up from last week when it averaged 3.04 percent. A year ago at this time, the 15-year FRM averaged 2.94 percent.

A five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.08 percent this week, with an average 0.7 point, up from last week when it averaged 2.79 percent. A year ago, the 5-year ARM averaged 2.79 percent.

A one-year Treasury-indexed ARM averaged 2.66 percent this week, with an average 0.5 point, up from last week when it averaged 2.57 percent. At this time last year, the 1-year ARM averaged 2.74 percent.

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    Ilyce R. Glink is an award-winning, nationally syndicated columnist, best-selling book author, and radio talk show host who also hosts "Expert Real Estate Tips," a Internet video show. She owns ThinkGlink.com as well as Think Glink Media, a privately held company that provides consulting, content and video services companies and non-profit organizations.

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