Mortgage rates continue to riseby Keith Gumbinger
Below is an excerpt from our latest Market Trends newsletter, available Friday night in your inbox:
As the economic news has turned somewhat less dire over the last couple of weeks, interest rates in general have firmed. That’s been less the case for mortgage rates, but they aren’t immune to overall trends, and have nudged off historic bottoms, if marginally so.
The mixed bag of data continued last week. While it’s too soon yet to be sure, there are some signs that the beginning of the third quarter of 2012 began on a stronger path than the second quarter. If the economy even continues to show signs of stability, let alone outright growth, the likelihood of mortgage interest rates firming somewhat increases.
Mortgage rates tick upward
HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator (FRMI)–found that the overall average rate for 30-year fixed-rate mortgages rose by two basis points (0.02%) to 3.90 percent.
The FRMI’s 15-year companion increased by one basis point, rising to 3.16 percent.
Important to homebuyers and low-equity-stake refinancers, already-low FHA-backed 30-year mortgages rose by six basis points to 3.51 percent, while the overall average rate for 5/1 Hybrid ARMs finished the weekly survey at 2.81 percent, unchanged from last week.
What’s moving mortgage rates?
Of course, the present ground remains shaky at best, and it wouldn’t take much of a scare of any kind to drive cash back to safety, which in turn would push rates back downward, too. With the nascent optimism in the market, the influential 10-year Treasury yield has moved from a daily low of 1.43 percent on July 25 to a present 1.73 percent as money has moved from safety to riskier and hopefully more profitable places, but even that increase in yield has translated into only a slight move in long-term fixed mortgage rates.
Mortgage and other interest rates would also be pressured to move if inflation seemed to be becoming a problem. At the moment, however, it is headed in the opposite direction.
Optimism in housing
Some expression of optimism is showing in the housing market, which has moved from being a drag on the economy to contributing to it. Housing Starts did ease by 1.1 percent in July compared to June, but the 746,000 annualized rate of ground breaking for new homes was above levels seen as recently as this spring and certainly way above year-ago levels. Single-family starts did ease a little in July while multifamily construction rebounded nicely after a soft couple of months. Permits for future activity rose by 7.1 percent to an annualized 812,000 in July, an encouraging sign that the housing market is slowly healing.
That being the case, it’s little wonder that builder moods continue to improve, too. The National Association of Homebuilders index of member sentiment moved to a five-year high reading of 37 in August, as sales of single family homes, traffic in showrooms and expectations for the next six months all moved upward. Low mortgage rates and low prices are producing strong affordability, and at least some buyers are taking advantage of the opportunity.
No reason to expect serious movement
At the moment, mortgage rates continue to wander around aimlessly. That’s to be expected in a time of mixed economic messages, where both sunny and cloudy patches hold sway at different times. At the moment, we’re more in a partly sunny environment, with modest optimism and greater attention to positive over negative news, but there are plenty of clouds which could easily blot out the sun at a moment’s notice. For the moment, there’s no reason to expect much movement in mortgage rates, and we’ll probably see a couple of basis point wobble in the averages at most this week.