Mortgage Rates Hit 2 Year High

Mortgage Rates Hit 2 Year High

Mortgage rates are back on the incline, with key loans hitting their highest marks in two years. Rates continue to rise on the expectation that the Federal Reserve will curb its massive stimulus policies – a bond purchase program involving $85 million worth of Treasury notes and mortgage-funded securities. However, despite the steady rise over the past months, rates remain historically low. Affordable mortgage loans have been instrumental in fueling a housing recovery that has, in turn, helped to promote growth within the economy.The average rate on a 30-year fixed mortgage hit a two-year high this week, according to the latest survey by mortgage buyer Freddie Mac. Previously at 4.29 percent, the average on a 30-year fixed-rate loan rose by .22 percentage point to 4.51 percent. The average on a 30-year loan neared a historic low as recently as early May, but has now climbed to its highest level since July 2011. The 0.53 percentage point increase marks the 30-year fixed loan’s highest weekly increase in more than 26 years.The average rate on a 15-year fixed mortgage also rose this week, climbing to 3.53 percent from 3.39 percent – a .14 percentage point increase. The 3.54 percent mark is the highest the 15-year fixed average has reached since August of 2011. It previously achieved a historic low in early May, when it fell to 2.56 percent.Whether the Federal Reserve ends its bond buy-back program could depend on the job sector. Freddie Mac’s chief economist, Frank Nothaft, believes the Fed will not slow bond purchases until there is evidence of improvement in the labor market. “June’s strong employment led to more market speculation that the Federal Reserve will reduce future bond purchases, causing bond yields to rise and mortgage rates followed,” Nothaft said in a statement. However, he pointed to minutes released from last month’s Federal Reserve monetary policy meeting as a sign the Fed will hold back for now.The average rate on a hybrid five-year adjustable mortgage also rose this week, climbing to 3.26 percent from 3.10 percent. The average on a one-year ARM remained static at 2.66 percent.Looking ahead, rates are expected to continue rise or remain unchanged. In the latest Mortgage Rate Trend Index by Bankrate.com, 75 percent of the experts polled believe mortgage rates will climb or remain static over the next week. “Bond prices have continued to worsen, driving rates higher. Look for rates to remain in the mid to high 4s,” says Academy Mortgage branch manager, Derek Egeberg.


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Dated: July 12th 2013
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