Monday, May 21, 2018
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Mortgage rates increase again, to 4.3%

Latest jump follows Fed’s decision to hike key interest rate

Mortgage rates, which had begun to move higher ahead of the Federal Reserve’s decision to increase its benchmark rate, rose again this week.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average leaped to 4.3 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.21 percent a week ago and 3.73 percent a year ago.

The 15-year fixed-rate average climbed to 3.5 percent with an average 0.5 point. It was 3.42 percent a week ago and 2.99 percent a year ago. The five-year adjustable rate average rose to 3.28 percent with an average 0.4 point. It was 3.23 percent a week ago and 2.93 percent a year ago.

Steady job growth, the anticipation of higher short-term interest rates, and rising inflation expectations pushed home loan rates to their highest levels since December. The Fed’s decision to raise the federal funds rate came too late to be factored into Freddie Mac’s survey. The government-backed mortgage-backer aggregates current rates from 125 lenders from across the country weekly to come up with national average mortgage rates.

“As expected, the Fed announced its first rate hike of 2017 and hinted at additional increases throughout the remainder of the year,” said Sean Becketti, Freddie Mac chief economist.

Historically, the central bank’s moves have little effect on mortgage rates. 

Home loan rates tend to spike immediately before the Fed’s decision but then settle in. 

Most economists still predict that rates will stay below 5 percent through 2017.

Wednesday’s “widely anticipated interest rate increase is a reflection on the broad-based strength of the U.S. economy, and already partially priced into mortgage markets,” said Svenja Gudell, chief economist at Zillow. 

“Rising rates pose just a modest headwind for home shoppers in the priciest housing markets. For the typical American home shopper, implications of [Wednesday’s] vote should only increase their monthly mortgage payment by about $16, or about $197 per year. Tight inventory remains a much more pressing concern for home shoppers today, a situation that is unlikely to ease in the months ahead.”

Meanwhile, mortgage applications increased last week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — rose 3.1 percent. The refinance index grew 4 percent, while the purchase index was 2 percent higher.

The refinance share of mortgage activity accounted for 45.6 percent of all applications.

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