After a brief pause, mortgage rates are back on the ascent.
According to data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.61 percent with an average 0.4 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.55 percent a week ago and 4.02 percent a year ago. The 30-year fixed rate hasn’t been this high since May 2011.
The 15-year fixed-rate average jumped to 4.08 percent with an average 0.4 point. It was 4.01 percent a week ago and 3.27 percent a year ago. The five-year adjustable rate average grew to 3.82 percent with an average 0.3 point. It was 3.77 percent a week ago and 3.13 percent a year ago.
“Signs of an economy humming along near full capacity; geopolitical developments in the Middle East, which could push oil prices sharply higher; and comments from several Fed officials all contributed to the upward move,” said Aaron Terrazas, senior economist at Zillow. “Markets currently expect three interest-rate hikes from the Federal Reserve Board this year, but comments from several [Federal Open Market Committee] voters over the next week could move expectations for a potential fourth rate hike before 2019. Given recent sensitivity around oil prices and inflation, markets are also likely to watch energy market data more than is typical.”
After a major sell-off in the bond market following stronger-than-anticipated economic data, the yield on the 10-year Treasury soared to its highest level in nearly seven years. It crossed the 3 percent threshold Monday and then had its biggest single-day jump since early March on Tuesday. It ended the day at 3.09 percent Wednesday.
Because the movement of long-term bonds is one of the best indicators of where mortgage rates are headed — when yields rise, interest rates tend to rise — home loan rates followed suit.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half of the experts it surveyed say rates will continue to rise in the coming week. Greg McBride, chief financial analyst at Bankrate.com, is one of those who expect rates to move higher.
“The price we pay for a more robust economic environment is higher inflation and higher interest rates,” McBride said. “Accordingly, mortgage rates are at the highest levels in nearly seven years.”
Meanwhile, mortgage applications declined last week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — decreased 2.7 percent from a week earlier. The refinance index fell 4 percent, while the purchase index dropped 2 percent.
The refinance share of mortgage activity accounted for 35.9 percent of all applications, its lowest level since August 2008.
“The combination of higher rates and tough buyers’ market are taking a toll on application volume,” said Brian Surgener, senior vice president of strategy and analytics at BBMC Mortgage. “Volatility in the rates is traditionally good for the market, as it will push people off the fence. But with the frustrations with home demand, we may continue to see purchase applications drop, and there is no doubt refinance applications are going to continue to grind down.”
More Real Estate: