Mortgage rates
rise dramatically

A sudden rise in the value
of the yen catches many
American home-buyers
by surprise

By Star-Bulletin staff and wire

As Asian financial turmoil pushes the value of the dollar down, mortgage rates in Hawaii and across the United States are going up.

For potential home-buyers, the source of the problems began Wednesday, when the ailing Japanese yen made a sudden, dramatic rise in value against the dollar.

That reversed the trend of falling Asian currencies that had helped push interest rates down for weeks and prompted a surge in home buying across the United States.

Almost immediately, mortgage rates went up more than half a percentage point at many big U.S. lenders, providing Americans with a harsh example of how global economic developments can disrupt their lives.

In Hawaii, Bank of Hawaii and First Hawaiian Bank raised their rate on a 30-year mortgage a half a percentage point this week. The rate went from 6.25 percent to 6.75 percent.

But rates are "still really good," said Renata Chanoski, a Realtor at Coldwell Banker Pacific Properties in Honolulu. "I don't think they're going to affect any activity this year. It's been phenomenal."

Also, she noted, "There's talk it (the rate) may be coming down before Christmas.

Peter Heinen, loan officer at Continental Pacific Management (formerly Realty Mortgage), believes the rate increase will be short-term.

"I believe it's just a one-time situation because of the bond market and hedge funds unwinding their treasury position," he said. "There are way too many sellers and not enough buyers in the treasury market."

Heinen expects the situation to correct itself and mortgage rates to come back down.

"I don't know if it will take a week or six months."

Meanwhile, he said the only people affected by the higher rates are those who need to close a loan.

"The rate is still good, but it's very difficult for a loan officer to explain why it went up five-eighths of a percent in three days."

He said 30 to 40 percent of his refinances in process probably shouldn't close now the way the rates are.

"They have to be on hold."

Wholesale rates -- those offered by lenders to independent mortgage brokers -- went up by nearly 1 percentage point on average, said Earl Brown of Dynamic Access Mortgages in Laguna Hills, Calif.

The increase "was almost instantaneous," but whether it is temporary is difficult to predict, said Chip Johnson, a senior vice president at Crestar Mortgage Corp., a nationwide lender based in Richmond, Va.

The yen's recovery was based on reports that Japan might soon adopt new measures to boost its economy. As the yen started its climb, yields on long-term U.S. Treasury bonds also went up, jumping from 4.71 percent on Monday to a closing rate of 5.12 percent yesterday.

Because mortgage rates are pegged to bond yields, they also rose.