Economic optimism gives way to higher mortgage rates

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

PercentThere were not many fresh additional economic signals out last week to work with, but with the better-than-hoped for April employment report driving stock markets higher, less might actually be better, since rising equity prices often drag interest rates upward with them.

That was much the case last week, as popular market indicators like the Dow Jones Industrial Index posted new record highs. Given the optimism already expressed here, it does make one wonder what will happen when the economy really begins to fire on all cylinders.

Regardless, the chase for returns higher than the puny ones seen on safe-haven Treasuries is a bit of a siren song for cash, and money flowed out of bonds and into stocks last week, lifting mortgage rates. A portion of the late winter-early spring decline in mortgage rates was erased last week, and some more seems likely.

Mortgage rates on the rise’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) rose by seven basis points (0.07 percent) to 3.68 percent, rising from 2013 lows.

Meanwhile, the overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) managed just a five basis point lift (0.05 percent) to 2.91 percent for the week.

FHA-backed 30-year FRMs followed along with a five basis point increase of their own, trekking to an average rate of 3.31 percent, while the most popular ARM–the 5/1 Hybrid–stayed closer to the previous week’s all-time record lows with just a two hundredths of a percentage point (0.02 percent) blip to 2.59 percent for the week.

Higher mortgage rates this week

Mortgage rates moved upward a little last week and seem poised to do so again this week.

While we are presently below the peak for rates so far this year, we won’t retest them this week, but we may wander back there before too long, should the good economic news persist.

Although that may trim the value of a refinance or two, the big picture hasn’t changed or diminished: mortgage rates will remain near record low levels, and if the Fed can be believed, may be becoming easier to get, too.

HSH Associates Financial News Blog

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