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June 5th, 2013

Mortgage rates move up to yearly highs

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3-Federal-ReserveRates on the most popular types of mortgages leapt to the highest point in more than a years’ time, according to HSH.com’s Weekly Mortgage Rates Radar.

The average rate for conforming 30-year fixed-rate mortgages jumped by 19 basis points (0.19 percent) to 3.99 percent. Conforming 5/1 Hybrid ARM rates increased by 10 basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.74 percent.

“Bond and mortgage markets continue to prepare themselves for an early exit by the Fed,” said Keith Gumbinger, vice president of HSH.com. “Up until recently, expectations were that the Fed would begin to taper purchases of mortgage-backed securities (MBS) and Treasury bonds late in 2013, but that timeframe appears to have moved to September, possibly sooner.”

The Federal Reserve continues to purchase a total of $85 billion per month in MBS and Treasuries to help keep interest rates low and mortgage markets liquid.

“Before the Fed begins to pull back, we will need to see a lot more solid economic data, especially in labor markets. The news of late suggests that the economy is holding its own, but little more, and that’s with QE still fully in play. It could very well be that investors are getting ahead of themselves, given the lack of compelling evidence that the economy is ready to run without these supports,” adds Gumbinger.

Still, he acknowledges, without a spate of weak data, mortgage rates are less likely to decline, or decline significantly. This is discussed in greater detail in HSH.com’s latest Two-Month Forecast for mortgage rates.

Refinance applications take a nose dive

Given the steep mortgage rate increases as of late, it’s no surprise that mortgage applications are down. According to the Mortgage Bankers Association, overall applications were down 11.5 percent for the week ending May 31.

While purchase applications were down just 2 percent for the week, refinance applications took a 15 percent dive and sit at its lowest point since the end of November 2011, according to the MBA. This steep decline brought the share of refinance applications down to 68 percent of total applications, its lowest level since July 2011. This marks the fourth week in a row refinances have declined.

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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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