WASHINGTON – Mortgage rates continued their ascent, rising for the fourth week in a row.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to its highest level since last March, rising to 4.22 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.15 percent a week ago and 4.19 percent a year ago. The 30-year fixed rate has risen 27 basis points – a basis point is 0.01 percentage point – since the start of the year.
The 15-year fixed-rate average jumped to 3.68 percent with an average 0.5 point. It was 3.62 percent a week ago and 3.41 percent a year ago. The 15-year fixed rate has risen 30 basis points since the first week in January.
The five-year adjustable rate average inched up to 3.53 percent with an average 0.4 point. It was 3.52 percent a week ago and 3.23 percent a year ago.
The Federal Reserve chose not to hike its benchmark rate this week but signaled that it likely will raise rates three times this year because it expects inflation to pick up. The Fed doesn’t set mortgage rates but its decisions influence them.
When the economy is booming, the potential for inflation makes bonds less appealing and prices for bonds fall. When prices go down, yields rise. This week, the yield on the 10-year Treasury rose to 2.73 percent on Tuesday, higher than its been in almost four years. It has risen almost 30 basis points in a month. Because mortgage rates tend to follow the same path as long-term bond yields, home loan rates also moved higher.
“A steady increase in rates can be healthy for the economy, but this elevator-like movement we saw the last couple of weeks can be scary for the mortgage community,” said Brian Surgener, senior vice president of strategy and analytics at BBMC Mortgage. “Higher rates equate to higher payments, and if wage growth isn’t there to support the higher rates, we may see this economy start to stall. We saw this type of movement last year at the beginning of the year and then bonds turned back down. This year feels different and there’s a chance we finally see rates hold through the spring.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly three-quarters of the experts it surveyed predict rates will rise in the coming week.
“The Fed is expecting higher inflation and more interest rate hikes,” said Greg McBride, chief financial analyst at Bankrate.com. “That outlook will underpin further increases in mortgage rates.”
Meanwhile, with rates rising, mortgage applications lagged last week, according to the latest data from the Mortgage Bankers Association. The market composite index – a measure of total loan application volume – decreased 2.6 percent from a week earlier. The refinance index fell 3 percent, while the purchase index also dropped 3 percent.
The refinance share of mortgage activity accounted for 47.8 percent of all applications, sinking to its lowest level since August.
“Applications decreased last week, driven mainly by a 7 percent drop in government purchase loans and a 13 percent decrease in applications for government refinance loans,” said Joel Kan, an MBA economist. “Home purchase applications decreased over the week, but remained 10 percent higher than the same week a year ago.”