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March 28th, 2012

Mortgage rates still rising, but don’t panic

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Sold sign resizedRates on the most popular types of mortgages increased again in the past week, according to HSH.com’s latest Weekly Mortgage Rate Radar. The average rate for conforming 30-year fixed-rate mortgages rose by 3 basis points (0.03 percent) to 4.16 percent. Conforming 5/1 hybrid ARM rates increased by 5 basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.06 percent.

“Although rates moved upward this week, the size of the increase is small,” said Keith Gumbinger, vice president of HSH.com. “It appears that the interest rates that most influence mortgages have settled back this week compared to last, so mortgage rates should ease back a little as the week progresses.”

A fall in the bond market reflected earlier expectations that the U.S. economy was gaining traction at a faster rate – and that the Federal Reserve might start to increase interest rates sooner than the end of 2014. However, the most recent data suggest that economic growth seems to be flattening somewhat.

“Fed Chairman Bernanke’s comments on Monday about keeping interest rates low despite recent gains in the economy calmed the market,” said Gumbinger. “There are still plenty of economic troubles which might push interest rates down or cause the Fed to consider expanding its programs to keep interest rates low.”

Average mortgage rates and points for conforming residential mortgages for the week ending March 27 were, according to HSH.com:

Conforming 30-year fixed-rate mortgage

  • Average rate: 4.16 percent
  • Average points: 0.23

Conforming 5/1-year adjustable-rate mortgage

  • Average rate: 3.06 percent
  • Average points: 0.19

Spring housing market

The stars are certainly starting to align for a spring homebuying season this year—something that has been nonexistent for the last several years. Low mortgage rates will certainly help facilitate a strong real estate market this spring. As Gumbinger already pointed out, the rate increases over the last couple of weeks have been relatively minor—a three-basis-point bump in the conforming 30-year fixed rate is nothing to panic over.

Loan officer and former HSH.com contributor Dan Green said it’s no surprise that home sales are starting to pick up. Low mortgage rates and cheap real estate have increased affordability across the country.

“The nascent recovery that began last October is ongoing,” wrote Green today on his blog.”The number of home resales going under contract to first-time buyers, real estate investors, and everyone else remains high. Housing has built a nice clip of momentum, from California to New York.”

Over the tax credit hump?

Perhaps the most exciting thing about the NAR’s latest pending home sales report is that even though February’s pending sales figures were down from January, they were the third-highest since April 2010.

Green wrote this morning that, “February’s reading is a retreat from January’s high, but still marks the third-highest Pending Home Sales Index since April 2010, an important month in housing market footnotes. April 2010 is the month that the federal home buyer tax credit expired.”

Will rising mortgage rates negatively impact home sales?

The answer is “probably not” said Gumbinger, because affordability remains so high.

“Housing demand has been forming because the job market has improved somewhat, and consumer moods about the future have risen to some degree,” he says.

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One Response to “Mortgage rates still rising, but don’t panic”

  1. FirsTrust Wichita Says: March 29th, 2012 at 8:01 pm

    With the mortgage rates rising, this is the really best time to see a mortgage planner.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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