Mortgage rates moved higher for the third week in a row as financial markets awaited the outcome of the Federal Reserve’s meeting this week.
As expected, the central bank left the benchmark rate unchanged but was more upbeat in its assessment of the U.S. economy in its first meeting since Brexit. That could mean a rate hike is on the table for later this year.
The Fed news came too late in the week to be factored into Freddie Mac’s mortgage rates survey. The government-backed mortgage-backer aggregates current rates weekly from 125 lenders across the country to come up with a national average mortgage rate.
Rates did not increase much this week and continue to be low. Even as they continue to climb, they remain below norms. Bankrate.com, which puts out a weekly mortgage rate trend index, found that a third of the experts it surveyed believe rates will rise in the coming weeks. More than half thought they would remain unchanged.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average crept up to 3.48 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.45 percent a week ago and 50 basis points below (3.98 percent) where it was a year ago. (A basis point is 0.01 percentage point.) The 30-year fixed rate hasn’t been above 3.5 percent since late June.
The 15-year fixed-rate average also was higher, ticking up to 2.78 percent with an average 0.5 point. It was 2.75 percent a week ago and 3.17 percent a year ago.
The five-year adjustable rate average was unchanged from the previous week at 2.78 percent with an average 0.5 point. It was 2.95 percent a year ago.
“The 10-year Treasury yield remained flat this week in anticipation of the Fed’s July policy meeting,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“Mortgage rates, on the other hand, rose another 3 basis points to 3.48 percent. Nonetheless, home sales continue to benefit from the persistently low mortgage rates with June’s new home sales coming in at an annualized rate of 592,000 homes – its fastest pace since 2008.”
Meanwhile, mortgage applications decreased again this week, according to the latest data from the Mortgage Bankers Association.
The market composite index – a measure of total loan application volume – fell 11.2 percent from the previous week. The refinance index, which is the most sensitive to rate increases, dropped 15 percent, while the purchase index declined 3 percent.
The refinance share of mortgage activity accounted for 61.1 percent of all applications.
“Mortgage rates increased last week on strong housing market data,” said Mike Fratantoni, MBA’s chief economist. “As the pool of borrowers who can benefit from refinancing continues to dry up, even relatively small rate changes make bigger impacts on the overall refinance volume. Despite the 30 year fixed mortgage rate being almost 50 basis points lower than a year ago, applications to refinance dropped 15 percent last week.”
(c) 2016, The Washington Post · Kathy Orton