Last week the average rate on a 30-year, fixed mortgage jumped nearly 4% over the week prior to hit 4.46%–the highest single week leap in 26 years.  Though still historically low (rates were 18.63% in 1981 and 8.05% in 2000, according to data from Freddie Mac), analysts say rates will only continue to climb.

Freddie Mac economist Frank Nothaft assured USA Today reporter Julie Schmidt, however, that the rising rates will not derail the housing market recovery.  Sales volume and prices are likely to take a small hit, but the belief is that the recovery will carry on as the economy improves [source].

In fact, increased mortgage rates could be a sign that the economy is improving as a whole.  Mortgage rates are closely tied to 10-year Treasury bonds, whose interest rates have spiked recently in response to Fed Chairman Ben Bernanke’s optimistic comments made during a June 19^th press conference.  Bernanke spoke of improved financial conditions and pointed to the housing market as a chief contributor to economic growth.  He was confident enough to think that the housing market could withstand higher interest rates, stating that consumers expect house prices to continue to rise and that “compensates to some extent for a slightly higher mortgage rate.”

If bullish press conference remarks aren’t all that convincing in your book, then take a look at this December 2012 article in Forbes.  Here, Bill Conerly shows that in every case from 1976 to the present home prices actually rose over the period in which mortgage rates increased. Why?  The same reason cited by Bernanke:  “Mortgage rates only rise when people are feeling good about houses: inflation is pushing up home prices, and more people have jobs.”

So, what’s your take?  Will consumer confidence keep up the demand for homes despite higher rates?  If you’re in the title business, you’re probably focused on how the rates will affect volume.  Higher rates could cause consumers to shy away from buying a home altogether or they could just force consumers to reconsider their budgets when buying.  If you’re in the collections business, you’re probably more concerned with how the higher rates will affect home values or how the housing market reflects the financial stability of consumers in general.  Whichever your focus, leave a comment to let us know what these higher rates mean to you.