Strong employment numbers caused mortgage rates to take off with the 30-year fixed-rate average the highest it has been in nearly eight years.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average jumped to 4.94 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.83 percent a week ago and 3.90 percent a year ago. The 30-year fixed was last this high in February 2011.
The 15-year fixed-rate average climbed to 4.33 percent with an average 0.5 point. It was 4.23 percent a week ago and 3.24 percent a year ago. The five-year adjustable rate average rose to 4.14 percent with an average 0.3 point. It was 4.04 percent a week ago and 3.22 percent a year ago.
“The all-important read on the American labor market showed stronger-than-expected employment and wage growth, which gives the Federal Reserve yet another data point suggesting that the U.S. economy can withstand higher interest rates,” said Aaron Terrazas, senior economist at Zillow. “The upward momentum for rates is likely to continue in the near term.”
The Federal Reserve concludes its meeting later today and is not expected to raise its benchmark rate. However, indications are that the Fed will hike short-term rates for the fourth time this year when it meets next month. The central bank doesn’t set mortgage rates, but its decisions influence them.
Bankrate.com, which puts out a weekly mortgage rate trend index, found the experts it surveyed were almost evenly split on where rates are headed. Half said they will continue to rise in the coming week. The other half expect them to remain relatively stable.
Greg McBride, chief financial analyst at Bankrate.com, predicts that rates will rise.
“No Fed rate hike this week but clear indications of another to come in December will push bond yields and mortgage rates a bit higher,” McBride said.
Michael Becker, branch manager at Sierra Pacific Mortgage, says rates will hold steady.
“With a lack of economic news or reports to move markets, I expect bond yields and mortgage rates to remain flat in the coming week,” Becker said.
With rates rising, mortgage applications continued to diminish, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — declined 4 percent from a week earlier. The refinance index fell 3 percent from the previous week, while the purchase index dropped 1 percent.
The refinance share of mortgage activity accounted for 39.1 percent of all applications.
“The steady rise in mortgage rates ... continues to weigh on mortgage applications, as total volume fell last week to its lowest level since December 2014,” said Bob Broeksmit, MBA president and chief executive. “Although purchase applications declined for the second straight week, mortgage lenders throughout the country say homebuyer demand is still strong. With home price growth moderating, inventory conditions improving and incomes rising, the foundation is there for activity to pick up before the end of the year.”
The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability increased in October. The MCAI rose 2.5 percent to 186.7 last month. An increase indicates that lending standards are loosening, while a decrease signals they are tightening.
“Credit availability increased in October, driven largely by an expansion in the supply of conventional credit, while government credit fell slightly over the month,” Joel Kan, an MBA economist, said in a statement. “Reversing a trend from last month, lenders made more conventional and low down payment programs available to prospective borrowers. This increase in supply was likely in response to a growing number of first-time home buyers in the market. … Jumbo credit availability also expanded last month, with the jumbo index increasing again to its highest level since the survey began.”
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