Freddie Mac said the average 30-year fixed mortgage rate rose to 4.51% last week, from 4.29%, but while that might worry some buyers looking for a home, it can actually be viewed as an important positive signal.

“Increases in rates would not be occurring if there wasn’t economic growth, says Steve Blitz chief economist at ITG Investment Research. “If people thought the economy was heading south, even with absence of quantitative easing, the rates wouldn’t rise.” remember that rates are still at historic lows. In fact, for every $100,000 in a loan, an increase of 100 basis points only adds $50 to each monthly payment.
“If that makes a difference, you probably can’t afford the home,” says Blitz.

While a slow and steady rise in mortgage rates isn’t expected to stifle demand for housing, the environment makes it less attractive for existing home owners to refinance to lower rates. Over the last several quarters, banks have benefited from the uptick in refinances, but the closing and bank charges that accompany a refinancing may not offer consumers much of a reason to refinance.

Although regional banks such as US Bancorp USB +1.37%, Zions Bancorporation and Fifth Third Bancorp FITB +0.91% could feel the pinch from lower refinancing volume, Blitz doesn’t see this as a major concern: “New mortgages, as opposed to refinancing, could grow a lot faster and offset any loss in the refinancing business,” he says.

Plus, the steepening 10-year Treasury curve over the past month gives banks an even greater incentive to lend money. “This results in more profit on the loans, which is a very powerful force for bank earnings.”

Aside from banks, home builders are on the receiving end of the housing market rebound, even though stock prices have been choppy.
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