Mortgage rates hit 2013 highby Tim Manni
Below is an excerpt from of our latest Market Trends newsletter, a weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.
Mortgage rates moved higher last week, boosted by solid economic data with little to the contrary to be found.
If anything, fresh data out seemed to buttress the previous week’s reports, denoting an economy perhaps more resilient than could be expected, given recent tax bites and certain price pressures. Even with the recent rise in mortgage rates, which have served to move us about a third of a percentage point off the record lows seen in December, it’s important to retain perspective about where they are at the moment.
Conforming 30-year rates hit yearly high
HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbo) leapt by nine basis points (0.09 percent) to 3.88 percent, a 2013 high.
The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbo) rose just four basis points (0.04 percent), rising to 3.08 percent for the week.
FHA-backed 30-year fixed-rate mortgages added eight basis points (0.08 percent), lifting to an average rate of 3.45 percent, while the overall average rate for 5/1 Hybrid ARMs rose six hundredths of a percentage point, climbing back into well-trodden territory at an average interest rate of 2.71 percent.
It doesn’t take more than a cursory glance at the chart below to see the truth: Even with the rise from the bottom of the bottom for rates, they have only returned to levels recently celebrated as “new record lows!”
Let’s face it: Higher rates should be expected
That’s not to say that increases in mortgage rates are welcome or desirable, but they are to be expected. In fact, the stronger the economy becomes, the higher rates may grind; the Federal Reserve is keeping them low to goose the economy, but an economy responding to the Fed’s medicine will soon see less of a need for it in order to function. If not otherwise manipulated, higher rates are the natural result of a growing economy, as rising demand for available credit supply and concerns about inflation allow costs to rise.
After years of “Mortgage Rates Declining” or “New Lows for Rates,” “Mortgage Rates Moving Higher” it’s a headline that we all must ultimately get used to, as it will become a more and more commonplace occurrence as we wend our way into the future. Still, that future remains in the future, but no one should expect that seeing headlines of an improving economy have no effect on the behavior of investors, Federal Reserve policies or not.
It wouldn’t surprise us if the lift in mortgage rates since we turned 2013 has trimmed some optimism among those in the housing sector. We’ll get a look at that thia week, as the National Association for Home Builders will report in on the moods of its members. Housing starts and building permits will also provide some clues, and we’ll also have a few other indicators to work with. The Federal Reserve has a meeting this week, and there will be no change to the various policies the Fed is maintaining. However, the release of the minutes in three weeks’ time may provide clues as to how quickly these programs may change.
Mortgage rates were firm all week long last week, and probably will be this week, as well. We would expect perhaps a couple of basis point lift in mortgage rates by the time this week is through, but if the housing news isn’t that strong, we just might move the other way by a similar amount.