Mortgage rates drop after steep rise; remain above 4 percent level

July 3, 2013

After last week rising sharply on the news that the Fed would begin pulling back stimulus measures, average mortgage rates this week fell but remained above the 4 percent level, according to new data released Wednesday by Freddie Mac.

The 30-year fixed-rate average this week decreased to 4.29 percent from 4.46 percent. This time last year, the 30-year averaged 3.62 percent.

The 15-year average, which in recent weeks rose above the 3 percent level, fell to 3.39 percent from 3.50 percent. A year ago, the rate averaged 2.89 percent.

“Fixed mortgage rates fell over the holiday week as market concerns over the timing of the Federal Reserve’s pullback in bond purchases eased somewhat,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement.

“Rates are still low by historical standards and should continue to aid in housing affordability and the ongoing recovery of the housing market,” Nothaft added. “For instance, pending home sales rose 6.7 percent in May to the strongest pace in over six years. In addition, residential construction spending increased in four of the first five months this year.”

Hybrid adjustable rate mortgages were mixed. The five-year ARM rose to 3.10 percent from 3.08 percent. Last year at this time, that rate averaged 2.79 percent. The one-year average remained steady at 2.66 percent, compared to 2.68 percent last year at this time.

Meanwhile mortgage applications for the week ending June 28 dropped 11.7 percent from the week before, according to the latest figures from the Mortgage Bankers Association.

The group’s weekly purchase index fell 3 percent and the refinance index dropped 16 percent.

“Mortgage rates reached their highest point in two years last week. At these rates, many fewer homeowners have an incentive to refinance, and refinance application volume declined more than 15 percent,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement.

“With this decline in volume, the refinance share dropped to its lowest level in more than two years,” Fratantoni added. “Purchase application volume also declined, but not nearly to the same extent, as affordability remains strong.”

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Dion Haynes · July 3, 2013