Mortgage Rates Near Year Highs

Following a short-lived decline, mortgage rates are once again trending upwards. The rise in rates is a attributed to the release of a series of positive economic reports, including data that showed an increase in residential construction spending for the ninth consecutive month. Despite the rise in mortgage rates, which continue to inch toward their high points for the year, home loans remain relatively low by historical standards.

The average rate on a 30-year fixed mortgage loan increased by 0.06 percentage point this week, according to the latest survey by mortgage buyer Freddie Mac, climbing to 4.57 percent, up from 4.51 percent. It is now two weeks removed from hitting 4.58 percent, its highest level since July of 2011. A year ago, the 30-year fixed loan was trending at 3.55 percent.

This week’s average marks only the fourth time this year that the 30-year fixed has registered above 4.5 percent, which is a full percentage point higher than where it was trending in May. The rise has reduced affordability for some potential home buyers, as evidenced by a recent drop in home sales.

The average rate on a 15-year fixed loan continues to hover near its two-year high achieved in July of 2011. After remaining relatively unchanged through the first three weeks of August, it is on the rise in early September. The average on a 15-year fixed loan saw an increase of 0.05 percentage point over the last week, climbing to 3.59 percent, up from 3.54 percent. It is now more than a full percentage point higher than it was in early May, when it reached a historical low of 2.56 percent, and has seen an increase of 0.73 percentage point year-over-year.

In his weekly statement, Freddie Mac vice president and chief economist Frank E. Nothaft pointed to reports showing real gross domestic product growth and continued residential construction spending as a catalyst for the rise in rates. Rates had previously fluctuated due to concerns over the Federal Reserve’s bond buy-back program, which has, in turn, caused a recent lull in the housing-market recovery and the overall economy.

“Mortgage rates edged up this week on signs of a stronger economic recovery,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement. “Real GDP was revised upwards to 2.5 percent growth in the second quarter of this year. In addition, residential construction spending rose for a ninth consecutive month in July. Lastly, the manufacturing industry expanded by the fastest pace in August since June 2011.”

Like the fixed-rate mortgages, hybrid adjustable-rate home loans are also on the rise. The average rate on a five-year ARM rose 0.04 percentage point this week, jumping from 3.24 percent to 3.28 percent. Additionally, the average on a one-year ARM saw a 0.07 percentage point increase, rising to 2.71 percent, up from 2.64 percent.

Looking ahead, rates are expected to remain relatively unchanged. In the latest Mortgage Rate Trend Index by, 67 percent of the mortgage analysts poll predict that rates will either remain static or trend downward over the next week.

“The direction of mortgage rates over the next week will depend heavily on this Friday’s nonfarm payroll report,” opines WCS Funding Group mortgage banker Michael Becker. “Since it’s the last employment report prior to the next Federal Reserve meeting, it will weigh heavily on the decision as to when to start tapering. A stronger-than-expected employment report will pretty much guarantee that tapering will start this month, while a weaker-than-expected report could put that decision off for a while. Since I think the market has priced in tapering in September, I think that mortgage rates will hold steady in the coming week as long as the jobs report isn’t much stronger than expected.”


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