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Higher Mortgage Rates Unlikely to Drown Housing: Group

The potential for a lift in mortgage rates is unlikely to spell trouble for the housing recovery, according to a recent report.

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""Paul Diggle"":http://www.capitaleconomics.com/staff/property-economics/paul-diggle.html, a property economist with ""Capital Economics"":http://www.capitaleconomics.com/, said in a note Monday that still-low home prices will help cushion the blow from interest rates.

He said that the consultancy doubts that ""higher mortgage rates will derail a housing recovery"" that continues to benefit from higher home sales.

Mortgage rates continue to linger near record lows, with 30-year and 15-year fixed-rate mortgages hovering at or below 4 percent for the past several weeks.

Waning confidence in Europe's ability to halt the debt crisis in Greece drives investors to U.S. Treasury debt, widening yields and allowing mortgage rates to remain at historic lows.

The economist cited a ""National Association of Realtors"":http://www.realtor.org/ forecast that said 30-year rates could rise above 5 percent.

He also said that low home prices would help ensure that household income is able to absorb a lift in interest mortgage payments and monthly principal.

""That would leave the monthly burden of servicing a mortgage at less than half of what it was six years ago,"" he said. ""Overall, the housing market recovery that appears to be underway is probably strong enough to withstand a moderate rise in mortgage rates.

""Either way, mortgage affordability will still remain very favourable [sic],"" Diggle wrote.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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