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Mortgage rates pushed higher amid investors’ concerns

The 30-year fixed average climbed to 3 percent this week, its first increase in three weeks. (Theodore Taylor III)

Mortgage rates moved higher this week as worries about inflation and potential moves by the Federal Reserve unsettled investors.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 3 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount. They are in addition to the interest rate.) It was 2.94 percent a week ago and 3.24 percent a year ago.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national averages. It uses rates for high-quality borrowers with strong credit scores and large down payments. Because of the criteria, these rates are not available to every borrower.

The survey is based on home purchase mortgages, which means rates for refinances may be higher. The price adjustment for refinance transactions that went into effect in December is adding to the cost. The adjustment, which applies to all Fannie Mae and Freddie Mac refinances, is 0.5 percent of the loan amount. That works out to $1,500 on a $300,000 loan.

The 15-year fixed-rate average rose to 2.29 percent with an average 0.7 point. It was 2.26 percent a week ago and 2.7 percent a year ago. The five-year adjustable rate average was unchanged at 2.59 percent with an average 0.3 point. It was 3.17 percent a year ago.

“Mortgage rates ticked up this week, in reaction to hints from the Federal Reserve that they may tighten monetary policy,” Matthew Speakman, an economist at Zillow, wrote in an email. “Wednesday’s release of the Fed’s April meeting notes showed that some meeting participants suggested that the central bank could begin to discuss tapering their program of asset purchases — which has placed consistent downward pressure on mortgage rates — should the economy continue to ‘make rapid progress toward the Committee’s goals.’ While this language is far from a commitment to a policy shift and appeared to reiterate previous comments from the central bank, the statement did spark a modest selloff in bonds.”

The Fed released the minutes from its April meeting this week. In them, Fed officials indicated they were optimistic about the economy. Some of them — how many is unclear, the minutes only said a “number” — are ready to start discussing when to pull back on the bond-buying program. Since early in the pandemic, the central bank has been buying $120 billion in Treasurys and mortgage-backed securities each month to help prop up the economy. These purchases have also held down mortgage rates.

“Looking at the [Federal Reserve] meeting minutes, the Fed might not be thinking about tapering asset purchases, but they are thinking about talking about it,” said Greg McBride, chief financial analyst at “That’ll be enough to spook investors a bit.”

After the housing crash in 2008, the Fed undertook a similar bond-buying program. In 2013 when then-Fed Chair Ben Bernanke mentioned the central bank tapering its purchases, mortgage rates soared. Although there is no indication the Fed has plans to reduce its bond purchases anytime soon, the mere suggestion of it might be enough to rattle investors and send home-loan rates higher., which puts out a weekly mortgage rate trend index, found the experts it surveyed mixed on where rates are headed in the coming week. Forty-two percent expect rates to go up, another 42 percent expect them to remain about the same, and the remainder expect them to fall.

Ken H. Johnson, a real estate economist at Florida Atlantic University, predicts rates will begin to move up.

“Between investment opportunities brought about by a steepening yield curve and the 10-year Treasury market, 30-year mortgages will witness a decline in value and a corresponding increase in yield,” he said. “Thus, long-term mortgage rates should begin to see a series of slow and steady rate increases in the weeks ahead as investors move to alternative risk-adjusted investment opportunities.”

Meanwhile, mortgage applications continued to grow last week, spurred by refinances. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 1.2 percent from a week earlier. The refinance index climbed 4 percent from the previous week, while the purchase index dropped 4 percent. The refinance share of mortgage activity accounted for 63.3 percent of applications. Refinance activity has increased for three weeks in a row.

“Applications for conventional and VA refinances increased,” Joel Kan, an MBA economist, said in a statement. “Ongoing volatility in refinance applications is likely if rates continue to oscillate around current levels. A decline in purchase applications was seen for both conventional and government loans. There continues to be strong demand for buying a home, but persistent supply shortages are constraining purchase activity, and building material shortages and higher costs are making it more difficult to increase supply. As a result, home prices and average purchase loan balances continue to rise, with the average purchase application reaching $411,400 — the highest since February.”

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