Tags: jim cramer | mortgage | rate | 5 percent

Jim Cramer: Economy Gets Hurt Once Mortgage Rates Hit 5 Percent

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By    |   Monday, 29 October 2018 08:29 AM

Investment guru Jim Cramer warns that a 5 percent mortgage rate is the “line in the sand” before the economy really gets hurt

"The mortgage rate is very high in this country," putting a drag on the economy as housing-related companies struggle, Cramer recently said on CNBC.

To be sure, long-term U.S. mortgage rates edged slightly higher this week amid continued anxiety in financial markets as interest rates rise, the Associated Press reported.

Home borrowing rates remain at their highest levels in more than seven years, with the key 30-year rate approaching 5 percent.

Mortgage buyer Freddie Mac said Thursday the rate on 30-year, fixed-rate mortgages ticked up to an average 4.86 percent this week from 4.85 percent last week. A year ago, it stood at 3.94 percent.

The average rate on 15-year, fixed-rate loans rose to 4.29 percent this week from 4.26 percent last week.

"We're going to see more and more bad earnings because [a] 5 percent mortgage is the end, that is the line in the sand," Cramer said.

Anxiety over rising interest rates, which stem from strength in the economy, has buffeted financial markets in recent weeks and spilled over into the housing market.

The combination of higher borrowing costs and increasing home prices has made home ownership less affordable.

Sales of new U.S. homes plunged 5.5 percent in September, the fourth straight monthly drop as the housing market cools, the government reported Wednesday. The annual rate of home sales has dropped 15.3 percent since May, eliminating much of the strength in sales from the first five months of 2018.

Builders had assumed that a stronger economy would boost sales, yet a greater share of new construction is going unpurchased.

Interest rates on Treasury bonds, which have climbed to seven-year highs in recent weeks, were steady this week. The yield on the key 10-year Treasury note, which can influence mortgage rates, was at 3.14 percent Wednesday, down from 3.15 percent last week.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates.

The average fee on 30-year fixed-rate mortgages was unchanged from last week at 0.5 point. The fee on 15-year mortgages also held steady, at 0.4 point.

The average rate for five-year adjustable-rate mortgages rose to 4.14 percent from 4.10 percent last week. The fee remained at 0.3 point.

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Investment guru Jim Cramer warns that a 5 percent mortgage rate is the "line in the sand" before the economy really gets hurt.
jim cramer, mortgage, rate, 5 percent
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2018-29-29
Monday, 29 October 2018 08:29 AM
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