Vanessa Barnes

The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in just the past week. As mortgages get more expensive, more would-be homeowners are priced out of the market – a threat to the fragile recovery in the housing market.

And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.

Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.

For people putting their homes on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their purchases and lock in something decent before rates go even higher.

It’s all about affordability. For every 1-percentage point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.

The rule of thumb is that every 1-percentage point increase in mortgage rates reduces a buyer’s purchasing power by about 10 percent.

For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.

Good economic news is the first reason rates are rising: U.S. government debt, a safe haven during the recession, is losing its appeal as investors turn to stocks and riskier corporate bonds.

Lower demand for debt means the government has to offer a better interest rate to sell its bonds. The yield on the 10-year Treasury note, which is closely tracked by mortgage rates, hovered above 4 percent this week, the highest since June, before falling back slightly.

The second reason is the Federal Reserve. Last week, the Fed ended its program to push mortgage rates down by buying up mortgage-backed securities. When demand from the central bank was high, rates plummeted to about 4.7 percent for much of last year. And business boomed for mortgage lenders as homeowners raced to refinance out of adjustable-rate mortgages and into fixed loans.

As of Wednesday, the Mortgage Bankers Association put the national average for a 30-year fixed-rate mortgage at 5.31 percent. One week ago, it was 5.04 percent.

Many analysts forecast rates will rise as high as 6 percent by early next year. If they go much higher, the already shaky housing recovery could stall. And that could slow the broader economic rebound.

In a normal market, with home prices steadily rising, a jump in rates doesn’t cause a big dip in demand. That’s because people know their homes will eventually rise in value, and are willing to accept a higher mortgage payment.

But now home prices are flat nationally and still falling in some places. Potential buyers are nervous about jumping in.

For people who bought their first home in the 1980s, when rates stayed over 10 percent for several years, paying 6 percent for a home loan may seem like a steal. But it’s coming as a shock to many first-time homebuyers this spring.

Copyright © USA TODAY 2010, David J. Lynch. Adrian Sainz reported from Miami.

More homebuyers will soon find that their mortgage broker can’t select an appraiser, part of a federal effort to ensure that appraisers aren’t pressured to inflate home values.

Effective Feb. 15, mortgage brokers will no longer be able to order appraisals on loans insured by the Federal Housing Administration (FHA). For consumers, that is supposed to mean home appraisals will more closely reflect a home’s value. The reason: Brokers who may profit from a loan being approved won’t also be choosing appraisers, who may feel pressured to declare a higher value.

But organizations such as the National Association of Realtors (NAR) and the Appraisal Institute say the change, along with other efforts to reform the appraisal industry, is hurting consumers and appraisers. They say new rules that swept through the appraisal industry in 2009 – rules designed to ensure appraisals are impartial – are resulting in excessively low home values, because chosen appraisers aren’t as experienced or as familiar with local markets. They also say the appraisers take more time, causing delays in getting appraisals done.

“The appraisal must be completely independent of the lending side, but there are extensive time delays,” says Joe Ventrone, vice president for regulatory and industry affairs with NAR. “The values that come back are lower. A $300,000 house might come back (appraised) at $200,000.”

A changed business

The changes began in May when Freddie Mac and Fannie Mae adopted a code designed to separate loan officers from the hiring of appraisers. Since Freddie and Fannie account for nine-tenths of new home loan originations, it reshaped the business.

The code means brokers, Realtors and loan-production staff – anyone who stands to earn a commission based on the value of the transaction – can’t hire an appraiser. Instead, lenders are turning to third-party appraisal management companies that typically hire appraisers on contract to do the job.

The Title/Appraisal Vendor Management Association (TAVMA), the trade association of the real estate settlement services industry, says the third-party firms have well-qualified appraisers to do the job. They also say if appraisal values come in low, it’s only because home prices have fallen due to the market.

But some trade groups say that appraisal management companies are providing appraisers – often from outside the market where the house is located – who are less qualified than independent appraisers that brokers and Realtors might choose. The National Association of Realtors says a member survey found almost 70 percent saying appraisal times had risen by more than eight days under the new rules.

Rob Oryl, an independent appraiser in Collingswood, N.J., says he is seeing it happen. “I know a great appraiser with a staff who had been in the business for years who now just works out of his home,” Oryl says. “It’s driving people out.”

© Copyright 2010 USA TODAY, a division of Gannett Co. Inc.; Stephanie Armour.