Utah Mortgage Rates Slightly Higher Than Most of U.S., But May Fall

Mortgage rates have been edging up for weeks, but Utah residents should not worry about rates escalating further this year, a well-known Utah economist told the Salt Lake Tribune Tuesday.

In fact, rates for 30-year Utah mortgages could ease a bit going into the prime home-buying season of spring and summer - perhaps even falling below 6 percent, said Jeff Thredgold, a Zions Bank consultant.

“Rates [for a 30-year Utah mortgage] could be back as low as the high-5 percent to low-6 percent range by summer,” he said.

Nationally, the average rate for 30-year fixed mortgage rates averaged 6.3 percent at the end of last week, up slightly from 6.2 percent the previous week, according to Freddie Mac. As recently as December, mortgage rates were about 6 percent.

In Utah, the average 30-year home loan rate appears to be slightly higher, with many lenders advertising rates around 6.5 percent.

Many in the Utah housing market are especially concerned with the home mortgage rates these days because of the marked increase in the price of houses over the past two years.

Higher prices have made it more difficult for low- to moderate-income families to buy a house, and put many in the position of risking default, leading to the recent spike in Utah foreclosures. Moderating those increases in home values, however, has been a slight decline in interest rates that began in September 2006.

But in recent weeks, rates on the popular 30-year mortgage have been moving higher, and higher mortgage interest rates mean higher monthly payments.

The monthly payment of principal and interest on a $300,000 home loan at 6 percent, for example, is just under $1,800. The monthly payment on the same amount at 7 percent would be nearly $2,000.

In some cases, families who are barely able to qualify for a home mortgage at 6 percent might not qualify for the same amount at 7 percent.

Jonathon and Tiffany Andrews of Clinton said they have been very concerned about mortgage rates in recent weeks as they have looked for a new house in Roy. And they were relieved to receive a rate lock weeks ago at around 6 percent for a 30-year mortgage.

“Had rates been a bit higher, we definitely would not have been able to afford the house we got,” Jonathon Andrews said.

Even among economists who expect rates to edge up by the end of the year, few are raising the possibility of home loan rates broaching 7 percent, which last occurred in 2002.

In his forecast for 2007, Doug Duncan, chief economist for the Mortgage Bankers Association, said there is a possibility that 30-year home mortgage loans nationally may rise to an average of 6.5 percent by the third quarter of this year. But even that rate is low by historical standards.