Mortgage rates resumed their ascent this week.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average inched up to 4.45 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.44 percent a week ago and 4.23 percent a year ago.
The 15-year fixed-rate average ticked up to 3.91 percent with an average 0.5 point. It was 3.90 percent a week ago and 3.44 percent a year ago. The five-year adjustable rate average edged up to 3.68 percent with an average 0.4 point. It was 3.67 percent a week ago and 3.24 percent a year ago.
As expected, the Federal Reserve increased its benchmark rate Wednesday, raising it to 1.75 percent, the highest level in a decade. The central bank doesn’t set mortgage rates, but its decisions influence them.
The hike came too late in the week to be factored into Freddie Mac’s survey. The government-backed mortgage-backer aggregates current rates weekly from 125 lenders from across the country to come up with national average mortgage rates.
But the Fed’s confidence in the U.S. economy is driving bond yields higher. The yield on the 10-year Treasury hovered around 2.89 percent the past two days. When yields go up, home loan rates tend to follow.
“In light of the Fed decision, buyers should start developing contingency plans for higher mortgage rates,” said Danielle Hale, chief economist for Realtor.com. “Options are limited and hesitating to consider their financial options could mean losing out to other buyers. Days on market for homes were at an all-time February low of 83 days and are likely to move lower as we move into the heart of homebuying season.”
Although rising rates could put a damper on the spring home-buying season, they can also spur buyers into action. Because buyers worry that the latest increase will be the first of many, they become more desperate to buy a home right away.
“So far, U.S. housing markets remain resilient in the face of higher mortgage rates,” Len Kiefer, deputy chief economist at Freddie Mac, said in a statement. “The National Association of Realtors reported this week that existing home sales in February increased 3 percent month-over-month on a seasonally adjusted basis and are up 1.1 percent from a year ago.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that a majority of experts it surveyed say rates will continue to rise in the coming week. Greg McBride, chief financial analyst at Bankrate.com, is one who predicts higher rates.
“The Fed is confident about the economy and the expectations of faster growth, and an uptick in inflation will push bond yields and mortgage rates higher,” McBride said.
Meanwhile, mortgage applications were flat again last week, according to the latest data from the Mortgage Bankers Association. The market composite index – a measure of total loan application volume – decreased 1.1 percent from a week earlier. The refinance index fell 5 percent, while the purchase index ticked up 1 percent.
The refinance share of mortgage activity accounted for 38.5 percent of all applications.
“The refinance share of applications decreased to 38.5 percent, its lowest level since 2008, as a drop in refinance activity combined with an increase in home purchase applications over the week,” said Joel Kan, an MBA economist. “Purchase applications were 6 percent higher than the same week a year ago, as solid economic and demographic fundamentals persist.”
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.