Mortgage rates back on the rise

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.

Mortgage Rate ConceptAlthough the Federal Reserve failed to tip its hand about future plans for its Treasury and Mortgage-Backed Security buying programs last week, new suggestions about the strength of the economy moved mortgage rates higher, regardless.

The economy is still a mystery

This continues a stretch of more or less ambiguous economic data. At times, stronger signals have come, only to be offset by those exhibiting less strength. Even the Fed itself doesn’t seem to have a clear grasp, as it seemed to mark down its assessment of the economy’s recent pattern from “moderate” to only “modest.”

But market opinions and mortgage rates can change, and fairly quickly, as mortgage shoppers have come to know in the last couple of months.

Mortgage rates rose last week’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator–found that the overall average rate for 30-year fixed-rate mortgages rose by four basis points (0.04 percent) to 4.59 percent, erasing all of last week’s dip plus a little bit more.

The overall average rate for 15-year fixed-rate mortgages also increased by four basis points (0.04 percent), landing at 3.68 percent for the week.

FHA-backed 30-year fixed-rate mortgages firmed up by five basis points, ticking up to 4.23 percent, while the overall 5/1 Hybrid ARM fell by just one one-hundredths of a percentage point (0.01 percent) to an average 3.32 percent.

Fed: Muted growth for the most part

The Fed’s message of muted growth was perhaps intended to keep markets from becoming unsettled, as they did in May when the tapering program was first discussed, and again when the June Fed meeting concluded. However, countering that assessment was some important new data and revisions to previously published data, which tended toward the stronger side of things.

Don’t expect 4 percent mortgage rates

Mortgage rates are likely to find it much easier to rise than fall, given all the considerations in the market.

To see us return to 4 percent would require a fair litany of very soft economic data, and not tempered by any kind of strength or a panic somewhere else in the world which would see a flood of cash looking for a safe haven. Nothing is impossible, of course, but the likely course is that pretty solid and stable growth gives the Fed a chance to move closer to the exit and a process of slipping out the door as quietly and quickly as they can.

Look for mortgage rates to rise this week

All indications at the moment suggest that mortgage rates are likely to be flat to slightly higher this week, with an increase of perhaps a handful of basis points at most.

Between now and then, we’ll be reading the tea leaves and polishing the crystal ball as we work on the next two-month forecast for mortgage rates, due out Friday.

HSH Associates Financial News Blog

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