Bond yields had been heading higher, bringing mortgage rates along with them. Then the Federal Reserve met this week, opting not to raise its benchmark rate.
Not only that, in its statement, the central bank said that “economic activity appears to have slowed.”
Because of the dovish tone struck by the Fed, home loan rates are expected to reverse course. Bankrate.com, which puts out a weekly mortgage rate trend index, found that a majority of the experts it surveyed believe rates will go down in the coming week.
The Fed’s announcement came too late in the week to have much of an impact on the Federal Home Loan Mortgage Corp.’s survey. The government-backed mortgage-backer aggregates current rates weekly from 125 lenders from across the country to come up with a national average mortgage rate.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 3.66 percent with an average 0.6 point, its highest level since late March. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.59 percent a week ago and 3.68 percent a year ago.
The 15-year fixed-rate average rose to 2.89 percent with an average 0.6 point. It was 2.85 percent a week ago and 2.94 percent a year ago.
The five-year adjustable rate average increased to 2.86 percent with an average 0.5 point. It was 2.81 percent a week ago and 2.85 percent a year ago.
“Treasury yields marched higher this week,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“As a result, the 30-year mortgage rate jumped 7 basis points to 3.66 percent,” Becketti said. “The Federal Reserve’s decision to leave the Federal funds rate unchanged triggered a 9 basis point drop in the 10-year Treasury yield on Wednesday, however the drop occurred too late to impact this week’s survey.”
Meanwhile, higher rates pushed mortgage applications lower, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume – fell 4.1 percent from the previous week. The refinance index dropped 5 percent, while the purchase index went down 2 percent.
The refinance share of mortgage activity accounted for 54.4 percent of all applications.