The unbalanced economic recovery continued last week as we saw a decent improvement in the March job numbers, one of the factors responsible for firming up mortgage rates last week:

HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages rose by six basis points (.06%) to finish the week at 5.17%. A key component of the first-time homebuyer market, FHA-backed 30-year fixed-rate mortgages increased by five basis points to land at 4.81%. ARMs are starting regain at least some favor in the market, and Hybrid 5/1 ARMs, perhaps the most preferred alternative to the traditional 30-year FRM (notably for jumbo buyers) increased a full tenth-percentage point (.10%), beginning April at an average of 3.84%.

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Improving economic data sent mortgage rates rising toward week’s end. Interestingly, the latest issue of HSH’s Market Trends Newsletter, “Better Data Equals Higher Rates — Maybe,” questions whether our improving economy will continue to put upward pressure on rates.

“One thought did occur to us this week beyond the conventional wisdom. It’s a given that an improving economy will of course drive interest rates higher, as demand for credit and prospects for inflation increase. Usually, this has a corresponding effect on mortgage rates (particularly fixed-rate mortgage rates). With so many of the troubles in housing and mortgage financing so evident over the past couple of years, and the risks of making loans so clear and persistent, we’re left to wonder:”

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“More people get burned trying to time the bottom of the mortgage market than the top of the stock market.”
–Keith Gumbinger

When mortgage rates sank to the lower end of 5% last month, hordes of borrowers began the refinance process, eager to cash in on a lower rate. Even when the rate was close to 5%, some borrowers waited for rates to drop even lower.  Now that the recent spike in mortgage rates has ended the refi dream for many, some borrowers are blaming themselves that they didn’t lock in fast enough.

While we can understand why you want rates to fall as low as possible — and even when rates peaked on June 11 at 5.81%, that’s still considered a historically low rate — one of the main reasons that rates stalled is that our economy is showing signs of improvement. Originally, rates dropped like they did because of the recent economic turmoil and the fact that the Federal Reserve was distorting the marketplace by buying up billions of dollars in mortgage-backed securities.

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Hoards of would-be refinancers are probably kicking themselves, thinking they blew their chance at capturing a rock-bottom rate — not necessarily. Rates for 30-year fixed loans have leapt from 50-year lows to just under 5.45% in one week. Despite the significant increase, fixed rates still remain in a range considered significantly affordable by most mortgage experts.

We want to know how the sudden rate increase has affected you.

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