Decline in mortgage rates was short lived

3-Federal-ReserveThe lower trending mortgage rates we reported at the start of last week didn’t last that long. Both the statement following the Federal Reserve’s FOMC meeting last week and, perhaps more so, Chairman Bernanke’s words in a press conference following the meeting shot mortgage rates higher during the second half of last week.

Below is an excerpt from of our latest Market Trends newsletter, Keith Gumbinger’s weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.

Fed sends mortgage rates upward’s broad-market mortgage tracker of fixed mortgage rates found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) lifted by four basis points (0.04 percent) to 4.19 percent, by the time the week was over.

The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) added just two basis points to its average (0.02 percent), rising to 3.35 percent for the week ending June 21.

FHA-backed 30-year fixed-rate mortgages added another four basis points to move to an average rate of 3.81 percent, while the overall 5/1 Hybrid ARM moved upward by six hundredths of a percentage point (0.06 percent) to 2.91 percent for the week.

Mortgage rates hit August-2011 highs

For bonds and mortgage rates, the effect of the Chairman’s remarks was both immediate and persistent, with a strong selloff driving yields on influential 10-year Treasuries to over 2.5 percent by late Friday. This pushed conforming 30-year fixed mortgage rates to daily highs not seen since August 2011.

Whether we like it or not, we will have an end to QE, with the tapering likely to begin later this year, if the Fed’s expectations come true. Frankly, their ability to forecast economic growth hasn’t been all that good to date, so there is reason to doubt that QE will disappear very quickly. At the same time, it is to be expected that trimming the program will happen regardless.

We will need to carefully evaluate just how much distortion the rise in mortgage rates causes in the housing market and to consumer attitudes. If the Fed is now more truly dependent upon incoming data than it had been, we could find even more volatile weeks ahead. The period leading up to the next Fed meeting at the end of July should prove interesting, too.

Big increases on the way

Mortgage rates don’t appear to have finished increasing just yet, and the mild rise in the figures above are masking some strong upward momentum. As we noted, Friday’s 30-year conforming average of 4.33 percent was the highest daily value since the end of August 2011, and we are starting this week with a considerable upward bias.

The four basis point rise last week will give way to perhaps a 20-basis point increase or more by the time June comes to a close this week.

You might check for current mortgage rates this week to see how things are going.

HSH Associates Financial News Blog

Related Posts

© 2019 Learn About Mortgage. All rights reserved. Site Admin · Entries RSS · Comments RSS
Powered by WordPress · Designed by Theme Junkie