Following a two-week decline, mortgage rates are once again on the rise.
After trending downward the past two weeks, the average rate on a 30-year fixed loan rose to 0.08 percentage point to 4.39 percent this week, according to the latest survey by mortgage lender Freddie Mac. One year ago, the average on a 30-year fixed-rate loan was trending at 3.55 percent, an increase of 0.84 percentage points.
The average rate on a 15-year fixed loan saw its own increase, albeit slight. Previously at 3.39 percent a week ago, the average on a 15-year loan rose by 0.04 percentage point to 3.43 percent. A year ago, the average on a 15-year loan was at 2.83 percent, an increase of 0.6 percentage point.
In early July, the average on a 30-year loan spiked to a two-year high over concerns that the Federal Reserve would curb its massive bond-purchase program. As concerns eased, so did mortgage rates, including the 30-year fixed, which fell to 4.31 percent before seeing an uptick this week. Comparably, the average on a 15-year fixed loan had previously achieved a historic low in early May, when it fell to 2.56 percent, before jumping to as high as 3.53 percent in mid-July.
The latest rise in mortgage rates can be attributed to the release of report by the Fed that indicated it would continue its stimulus policies involving $85 million worth of Treasury notes and mortgage-backed securities in the interim, but will likely begin to curb its purchases. Tapering its buy-back program is expected to continue to put upward pressure on mortgage rates in the coming months.
“Mortgage rates rose slightly leading up to the Federal Reserve’s monetary policy statement this week,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement. “The Fed indicated that the economy expanded at a modest pace, but the unemployment rate remains elevated.”
According to mortgage expert Al Bowman, the Labor Department recorded 326,000 new claims for unemployment benefits, which was nearly 20,000 less than what was expected. Despite a high unemployment rate, the reduced number or claims filed indicates “that the employment sector was stronger” than originally thought.
The average rate on a 5-year hybrid adjustable loan rose slightly from 3.16 percent a week ago to 3.18 percent. After holding firm at 2.66 percent over a four week period that ran from late June through July, the average on a 1-year hybrid adjustable loan dropped for the second consecutive week, falling ever-so-slightly from 2.65 percent to 2.64 percent.
Looking ahead, mortgage rates are expected to trend downward. In the latest Mortgage Rate Trend Index by Bankrate.com, 71 percent of the loan experts polled believe rates will either go down or remain static over the next week. “Mortgage bond yields fell after the Fed’s monetary policy statement offered no timetable for reducing (quantitative easing) bond purchases,” says Holden Lewis, Bankrate.com assistant managing editor. “That’s the new normal, at least until the employment report comes out August 2.”