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Mortgages rise, but rates remain appealing

Marcie Geffner

Mortgage interest rates ticked slightly up this week, but the trend line remained predominantly steady as it has in recent months.

30 year fixed rate mortgage – 3 month trend

30 year fixed rate mortgage – 3 month trend

Mortgage interest rates ticked slightly up this week, but the trend line remained predominantly steady as it has in recent months.

Overall, rates have moved "sideways," says Rob McAllister, a mortgage broker for West Seattle Mortgage, in Seattle. And sideways, in his view, is simply more of a good thing.

"We're at such low rates right now that sideways is a positive versus an upward trend," McAllister says.

The benchmark 30-year fixed-rate mortgage rose to 3.66 percent from 3.6 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index stood at 4.25 percent; four weeks ago, it was 3.59 percent.

Weekly national mortgage survey

Results of Bankrate.com's Jan. 23, 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: 3.66% 2.94% 2.71%
Change from last week: +0.06 +0.05 -0.03
Monthly payment: $755.74 $1,134.70 $670.11
Change from last week: +$5.58 +$3.95 -$2.61

The benchmark 15-year fixed-rate mortgage rose to 2.94 percent from 2.89 percent. The benchmark 5/1 adjustable-rate mortgage fell to 2.71 percent from 2.74 percent.

It's all about QE3

In the absence of major economic news, rates continued to be pushed and pulled by speculation as to how long the Federal Reserve will sustain its policy of purchasing mortgage-backed securities in its third round of quantitative easing, known as QE3.

The QE3 program was expanded in December, amid dissent among Fed members over whether it should be continued until 2014 or ended sooner. The Fed's internal disagreement has prompted bond market analysts and financial pundits to dissect every word from anyone connected to the Fed. They're trying to figure out exactly what the Fed is thinking and exactly when the program will conclude.

"The bond market has good days and bad days, depending on what economic release may be coming out or which Fed (member) might be talking," McAllister says. "Some of them are a little bullish and some of them are more bearish, and as they start chatting it up, usually the market reacts accordingly. If the market feels like the Fed is going to continue to buy mortgage bonds into 2014, that will hold rates down low for the majority of this year."

Normalization trend

The direction of rates "really runs on rumor" well before the Fed actually makes any changes in its rates or policies, says Stephen LaDue, senior loan officer at Prime Lending in Brookfield, Wis. He expects rates to normalize at some point after a transition period during which the Fed will start to back off and rates will begin to respond more to economic data and less to economic stimulus.

"There is some upward pressure, based on what the markets are doing, but do we see any major moves upward? Not now, because there is accommodation on the part of the Fed," LaDue says. Rates this low "aren't market-driven. They were put there by the Fed to keep the housing market from collapsing, (but now) the markets are healing very, very well."

Meanwhile, borrowers continue to take advantage of the low rates, mainly to refinance existing home loans, though homebuying loan activity increased last week as well, according to the Mortgage Bankers Association.

The group says mortgage loan applications increased 7 percent in the week that ended Jan. 18, compared to the prior week. Eighty-two percent of the total applications were to refinance.

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