Mortgage rates inched up this week as more signs of a slowing housing market emerged.
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 3.57 percent. Four weeks ago, it was 4.51 percent. The mortgages in this week's survey had an average total of 0.30 discount and origination points.
- The benchmark 15-year fixed-rate mortgage rose to 3.54 percent from 3.48 percent last week.
- The benchmark 5/1 adjustable-rate mortgage rose to 3.34 percent from 3.32 percent. The benchmark 30-year fixed-rate jumbo rose to 4.47 percent from 4.43 percent.
Weekly national mortgage survey
|Results of Bankrate.com's April 23, 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||3.54||3.34|
|Change from last week:||+0.05||+0.06||+0.02|
|Change from last week:||+$4.89||+$4.86||+$1.83|
Despite the small increase, borrowers shouldn't be worried yet. It's unlikely that rates will continue to climb in coming days, as they have been following a seesaw pattern, says Pava Leyrer, director of training for Northern Mortgage Services in Grandville, Mich.
"Rates have been going back and forth -- they go up 6 or 10 (basis points), then they go back down" she says. "It's still an extremely good market for borrowers."
Rates following the stock market
Mortgage rates once again seem to be fluctuating at the same pace as the stock market, says Brett Sinnott, director of secondary marketing for CMG Mortgage in San Ramon, Calif.
"For the first time in a few years, mortgage rates are following stocks again," he says. "They used to follow the exact same direction until the Fed stepped in. That correlation is coming back now."
That's another sign borrowers will definitely see more ups and down with rates in the near future, he adds.
Fewer people are buying homes
Even though rates remain near historic lows, some market observers say many first-time homebuyers face difficulties when trying to qualify for a mortgage and that's partially the reason that home sales have slowed.
Compared with February, sales of new homes fell 14.5 percent in March to a seasonally adjusted annual rate of 384,000, according to the Commerce Department. That's the lowest level for new home sales in eight months.
Despite the drop in sales, the median price of newly constructed homes increased about 12.6 percent to $290,000 in March compared with the same period last year.
Sales of previously owned homes also fell to the lowest level since July 2012, the National Association of Realtors said Tuesday. Sales dropped 0.2 percent in March to a seasonally adjusted annual rate of 4.59 million.
Are mortgage standards hurting the market?
"Overly stringent underwriting standards for mortgages have had a detrimental effect on modest-priced markets and have hit first-time homebuyers particularly hard," says David Crowe, chief economist for the National Association of Home Builders.
Crowe adds that today's buyers come from a smaller pool of people with established credit, more money for down payments and a desire for higher-priced homes.
Or is easy credit pumping up prices?
Sinnott says the problem could be the other way around. Borrowers still have "easy" access to credit and the number of qualified buyers competing for a limited number of homes available for sale is causing prices to artificially rise, making it harder for deals to close.
Builders broke ground on more homes in March than in February, the Commerce Department reported on Wednesday. But economists were expecting more. Housing starts climbed 2.8 percent to a seasonally adjusted annual rate of 946,000, about 24,000 fewer homes than economists had expected to see.
"You hear credit is tight, but you can still get an FHA loan with 3.5 percent down," Sinnott says. "For your average good-quality borrower, it's still really easy to get a home loan at a great rate. So you end up with 10 people bidding on a house that ends up selling for $15,000 over the asking price."
Leyrer says about 30 percent of the potential buyers she is working with can't find a house to buy and some have been on the market for six months. Rising home prices also are affecting affordability and especially, expectations, she says.
"People still have some of the mentality of prices being discounted and people giving houses away. The realization sets in once they start looking for a house."
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