Mortgage rates increase to September levelsby Tim Manni
It was a combination of the Federal Reserve’s latest edition of their quantitative easing efforts and a slight upward trend of economic indicators which caused mortgage rates to rise last week.
“Some analysts have speculated that the market got a little ahead of itself in preparation for the beginning of the [Fed's] program, and has been forced to back off a little bit,” according to the latest issue of HSH.com’s Market Trends Newsletter:
Housing markets continue to stumble along, with home purchasing remaining at poor levels. Economic fundamentals, most notably employment, continue to exert their influence, keeping the market from making headway.
Current refi wave
Low, and seemingly ever-declining, mortgage rates have kept banks and borrowers busy refinancing old, higher-rate mortgages:
For months, the financial health of banks and borrowers alike has been improved by refinancing of old, higher-rate mortgages. For banks, refinancing activity brings in fee income and profits on sales, contributing to the bottom line; for households, a change in the composition of monthly obligations can bring welcome financial breathing room. Low and especially declining rates have been a catalyst for these benefits, but [last] week, low rates took a step backwards.
Mortgage rates took a break from falling last week:
HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — revealed that the average rate for 30-year fixed-rate mortgages climbed by 14 basis points (.14%), ending HSH.com’s national survey at 4.76%, the highest such rate since the middle of September. For those buying homes or hoping to refinance with only a small equity position, FHA-backed loans are available at an average rate of 4.43%, and the overall average rate for hybrid 5/1 ARMs was 3.62% for the period. HSH.com’s public mortgage interest rate data series include rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.
Current mortgage rates: It’s all about perspective:
Though rates have shifted higher for at least a time, perhaps we should retain a little perspective. A year ago [last] week, conforming 30-year FRMs has just cracked below the 5% mark; despite [last] week’s bump, we are about a half-percentage point below that outstanding mark. However, the extended refinancing wave we’ve seen in 2010 has been milder than those in the past and seems more sensitive to even slight increases in interest rates. Other small flares in rates turned off the flow of refinancing applications sharply, and unless quickly reversed, this one seems likely to do the same. Any downturn in apps will no doubt be exacerbated by the impending holiday season.
But is the economic climate improving enough to warrant a rise in rates? Data out [last] week was mixed at best, with a few bright spots offsetting some darker ones.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “An Unwelcome Rise in Mortgage Rates.”
HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.