Mortgage rates were quiet this week, even as the stock market rallied on signs of a strengthening economy in the United States.
30 year fixed rate mortgage – 3 month trend
The benchmark 30-year fixed-rate mortgage stayed at 3.73 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.36 discount and origination points. One year ago, the mortgage index stood at 4.11 percent; four weeks ago, it was 3.76 percent.
The benchmark 15-year fixed-rate mortgage was 2.96 percent, the same as last week. The benchmark 5/1 adjustable-rate mortgage stayed at 2.68 percent.
Weekly national mortgage survey
Results of Bankrate.com's March 6, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
|30-year fixed||15-year fixed||5-year ARM|
|This week's rate:||3.73%||2.96%||2.68%|
|Change from last week:||N/C||N/C||N/C|
|Change from last week:||N/C||N/C||N/C|
When the stock market performs well, mortgage rates tend to rise, as investors pull money out of U.S. Treasury and mortgage bonds to bet on riskier investments. That hasn't happened yet this week, but analysts say rates may rise by a small amount in coming days.
"I think you are going to see rates maybe start to trend slightly higher as the stock market continues to gain momentum, and I think people will be selling some bonds to try to ride the stock market wave," says Rob Nunziata, president of FBC Mortgage in Orlando, Fla.
Economic recovery or stock market illusion?
The Dow Jones industrial average reached record highs this week, with the help of recent economic reports that were perceived by investors as positive.
One of the monthly employment reports tracked by investors showed the economy added 198,000 jobs in the private sector in February. The report was released Wednesday by Automatic Data Processing Inc. It beat economists' expectations and injected more confidence into the markets.
The main employment report, which is normally more reliable, will be released by the Department of Labor on Friday.
If Friday's jobs report shows the labor market is improving at a faster pace, mortgage rates may be affected, analysts say. But it's important to remember that the unemployment rate of 7.9 percent remains elevated and more than 12 million people are unemployed.
"By looking at the stock market everyone feels like the economy is getting better. But is it really?" asks John Stearns, a mortgage banker at American Fidelity Mortgage in Mequon, Wis.
Stearns says the housing market is not ready for higher rates yet. "Any uptick in rates is going to slow housing down," he says.
A Federal Reserve survey released Wednesday shows the housing market in the United States has continued to improve in most parts of the country.
"Residential real estate markets strengthened in nearly all districts and home prices rose amid falling inventories across much of the country," the Fed's Beige Book says.
The Fed says the U.S. economy improved in January and February, thanks in part to the recovery in the housing market and strong auto sales.
"Housing is a big part of the recovery," Stearns says.
Will the Fed keep mortgage rates low?
Mortgage rates may fluctuate in the near term, but they are expected to remain low as long as the Fed continues to purchase $85 billion worth of U.S. Treasury bonds and mortgage-backed securities, says Michael Moskowitz, president of Equity Now, a mortgage bank in New York.
"We are in a Fed-controlled market," he says. "But it's a little bit scary to think about what's going to happen in the future when the Fed stops buying bonds, if rates all of a sudden shoot up."
What should refinancers do?
Borrowers who are considering refinancing shouldn't panic, but they also shouldn't waste time, mortgage specialists say.
"If you can lower your rate and save, say $400 per month, that's almost $5,000 a year," Moskowitz says. "It's like getting a raise. Why would you wait?"
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