Five consecutive weeks of increases pushed mortgage rates to their highest level since April 2011.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.72 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.65 percent a week ago and 3.83 percent a year ago.
The 15-year fixed-rate average jumped to 4.16 percent with an average 0.5 point. It was 4.11 percent a week ago and 3.13 percent a year ago. The five-year adjustable rate average rose to 3.97 percent with an average 0.3 point. It was 3.92 percent a week ago and 3.20 percent a year ago.
“The robust economy, rising Treasury yields and the anticipation of more short-term rate hikes caused mortgage rates to move up,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Although the Federal Reserve raised its benchmark rate Wednesday, the news came too late in the week to be factored into Freddie Mac’s survey. Freddie Mac, the government-supported mortgage backer, aggregates rates weekly from 125 lenders nationwide to compile national average mortgage rates.
The Fed doesn’t set mortgage rates but its decisions influence them. Home loan rates are affected by several factors, including the expectations of investors. Good economic news tends to be bad for rates because a strong economy can lead to worries about inflation.
Inflation causes certain investments such as bonds to lose value. That’s why the movement of long-term bonds is a better predictor of where mortgage rates are headed than the actions of the central bank.
The yield on the 10-year Treasury climbed above 3 percent last week and has remained above that threshold. It peaked at 3.10 percent Tuesday before falling back to 3.06 on Wednesday.
“Bond yields went on a roller-coaster ride after the Fed decision,” said Michael Becker, branch manager at Sierra Pacific Mortgage. “First, they dropped, then they spiked, and then they dropped again. The big change is that the Fed removed the term ‘accommodative’ in regards to monetary policy … that means they no longer think rates are stimulative to the economy, and they are not yet restrictive to further economic growth. I think in the short term that markets may think the Fed may be slower to raise rates in the future and we could get a slight improvement in rates in the coming week. However, I do think the long-term pattern of higher mortgage rates is still intact.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half of the experts it surveyed say rates will fall in the coming week. Shashank Shekhar, chief executive of Arcus Lending, is one who expects rates to dip.
“As expected the Fed increased the rate,” Shekhar said. “However, there weren’t any major surprises in the minutes of the meeting that was released. With lack of overtly bearish news, expect the mortgage rates to trend lower this week. With four back-to-back weeks of the rate increase, it’s time for correction. Borrowers can expect a tad lower rate this coming week.”
Meanwhile, mortgage applications picked up again this week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 2.9 percent from a week earlier. The refinance index rose 3 percent from the previous week, while the purchase index also grew 3 percent.
The refinance share of mortgage activity accounted for 39.4 percent of all applications.
“It’s not unusual to see a lull in mortgage activity in August and then a bounce after Labor Day,” said Bob Broeksmit, MBA’s president and chief executive. “In addition, we suspect that some buyers may be getting off the sidelines in the face of rising mortgage rates. Looking forward, as the rate of home price growth slows and comes more in line with the pace of wage growth, we anticipate a further pickup in purchase activity.”
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