Page 18 - BusinessWest August 8, 2022

Matters of Interest
As Mortgage Rates Climb, a Historical View Lends Some Perspective
By Joseph Bednar
Mike Ostrowski remembers signing for his first mortgage.
The year was 1982. The 30-year
adjustable rate was ... wait for it ... 16.37%. “You could put a house on a credit card and
beat that rate,” said Ostrowski, president and CEO of Arrha Credit Union. From that histori- cal perspective, he noted, today’s rates, typically between 5% and 6%, don’t seem so onerous.
“We don’t make the market. We would like
to see a nice, steady rate that does not fluctu-
ate and move, but the fact of the matter is, even if the rates are hovering around 5% or 6% right now, that’s still a great rate,” he went on. “Did you catch the bottom of the market at 3%? Maybe some people did, and that’s great, but 6% isn’t ridiculous. It needs to be put in perspective. Peo- ple forget.”
That they do, said Kevin O’Connor, executive vice president of Westfield Bank. “People were really used to rates of 3% for 30 years fixed,” he said, though he was quick to note that doubling that rate does alter the affordability of some houses when shopping in today’s market, and he’s sensitive to that reality. Still, “people are sur- prised right now, but 15 years ago, 8% to 9% was common, so a lot of us still view 5% as a good rate.”
James Sherbo, senior vice president of Con-
sumer Lending at PeoplesBank, had similar thoughts, noting that, while 5% to 6% mortgage interest rates are historically low, they don’t seem low when people have been accustomed to a long stretch of much lower rates. And he understands why those interest rates, which are not directly tied to the Federal Reserve’s actions but tend to fol- low that pattern, are rising.
“Overall, it’s to slow inflation down, and part of that formula is the housing market,” Sherbo explained. “The thought is that, as rates increase, it will slow down the activity we’ve seen in the market the past couple of years.”
That activity has included an unprecedented swelling of home prices, driven by the laws of supply and demand — the former dragging way behind the latter in the wake of the pandemic and building-supply shortages.
“The whole goal in all of this is to cool down the overheated market, try to slow it down,” Ostrowski said. “If the Fed doesn’t take any action, you could be mired in inflation for a
James Sherbo (third from left), senior vice president of Consumer Lending at PeoplesBank, with his team of mortgage consultants.
long time. And that’s certainly not to anyone’s benefit.”
O’Connor noted that the Fed’s recent moves to boost the prime lending rate, which has led to increases in
other areas of the
rate environment,
Mortgage
Continued on page 20
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18 AUGUST 8, 2022
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