Mortgage rates edged up this week as the new Federal Reserve leader injected some confidence into the markets after her first speech as Fed chair.
30 year fixed rate mortgage 3 month trend
- The benchmark 30-year fixed-rate mortgage rose to 4.48 percent from 4.43 percent the previous week, according to the Bankrate.com national survey of large lenders. One year ago, that rate stood at 3.79 percent. Four weeks ago, it was 4.57 percent. The mortgages in this week's survey had an average total of 0.33 discount and origination points.
- The benchmark 15-year fixed-rate mortgage rose to 3.53 percent from 3.5 percent last week.
- The benchmark 5/1 adjustable-rate mortgage rose to 3.32 percent from 3.27 percent.
- The benchmark 30-year fixed-rate jumbo rose to 4.5 percent from 4.47 percent.
Weekly national mortgage survey
|Results of Bankrate.com's Feb. 12, 2014, 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:||4.48||3.53||3.32|
|Change from last week:||+0.05||+0.03||+0.05|
|Change from last week:||+$4.89||+$2.43||+$4.54|
A mortgage thrill
The increase comes after mortgage rates dropped for five weeks in row, dating back to the beginning of the year. Last week, mortgage rates reached a three-month low.
"I was able to get some customers (a rate) in the low 4s last week," says Pava Leyrer, director of training for Northern Mortgage Services in Grandville, Mich. "They are just thrilled. I would not have thought we could have gotten rates that low last week."
Despite the slight increase, rates are still attractive for now, she says. "Rates are going to go up, but I'm hoping it's a gradual move," she adds. "I'd like to see it stay under 5 percent or right around that range. I think consumers could get used to it fairly easily."
What's putting pressure on rates?
Federal Reserve chair Janet Yellen reassured Congress this week that the economy continues to grow despite some recent softness. During her testimony, she said the Fed plans to keep trimming its bond-buying stimulus program at each meeting. After two rounds of tapering, the Fed now buys $65 billion per month in mortgage and Treasury bonds, down from $85 billion a month last year. These bond purchases have long helped keep mortgage rates low.
China released upbeat data about its exports. That news put upward pressure on rates this week, as it eased some investors' concerns about the global economy. When investors gain confidence, they abandon safe investments such as mortgage and Treasury notes to bet on riskier, more profitable investments. This process normally leads to higher mortgage rates.
No need to pull your hair out
If you missed locking a rate last week, act quickly, but don't panic, says Bob Moulton, president of Americana Mortgage Group in Manhasset, N.Y.
"I think rates are going to be pretty stable for now," he says. "They may fluctuate a quarter of a percentage point or so, but not much more than that."
The Fed tapering certainly adds pressure to rates, but the Fed wouldn't let rates skyrocket because that could hurt the housing market, Moulton says.
"Even if they taper, I think they are going to keep an eye on rates and make adjustments to keep rates low," he says.
Housing market not as strong as you may think
Yellen admitted during her testimony that "the recovery in the housing sector slowed in the wake of last year's increase in mortgage rates."
Although still low, the rate on a 30-year fixed mortgage is about a percentage point higher than it was in May of last year. With the increase, refinances have mostly dried up.
TransUnion reported Wednesday that it recorded 52.84 million mortgage accounts as of the fourth quarter of last year, down from 53.85 million accounts a year earlier.
"The housing market also still shows some volatility, with both housing prices and originations dropping in the latter part of 2013 after experiencing improvements in the first part of the year," says Steve Chaouki, head of financial services for TransUnion. "New account originations have declined significantly in recent quarters."
What's a borrower to do?
There's no question the Fed will keep an eye on the housing market and on mortgage rates as it makes monetary policy decisions that could affect interest rates. But there's also no guarantee that rates won't spike overnight.
Get preapproved, and once you sign a contract, lock in your rate," Moulton says.
Some borrowers think they may get lucky if they wait for rates to drop, but normally they don't win the bet, Leyrer says.
"For the most part, only one or two out of 10 borrowers ever win at that game," she says.
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