Weaker manufacturing data and a more dovish tone from the Federal Reserve left mortgage rates unchanged relative to last week. However, interest rate-sensitive sectors of the economy – such as consumer mortgage demand and homebuilder construction sentiment – are on the mend, which indicates that lower interest rates are beginning to have a positive impact on some segments of the economy.
Mortgage rates declined over the past week and have now retreated in four of the past five weeks.
The decrease in borrowing costs are a nice slice of relief for prospective buyers looking to get into the market this summer. Some are undoubtedly feeling the affordability hit from swift price appreciation and mortgage rates that are still 67 basis points higher than this week a year ago.
As highlighted in our June Forecast, the economy and housing market overall are on solid footing this summer, which should support continued strength in housing demand. Home price growth is still high, but is expected to moderate, and while sales activity has slowed, it’s primarily because of stubbornly low supply.
Mortgage rates dipped for the second consecutive week.
Homebuyers have taken advantage of the recent moderation in rates, which led to a 4 percent increase in purchase applications last week.
Although demand has remained steadfast against the backdrop of this year’s higher borrowing costs, it’s important to note that the growth rate of purchase loan balances has moderated so far this year – and particularly since March. This slowdown indicates that buyers are having difficulty stretching to keep up with the pace of home-price growth.
While the very healthy job market continues to fuel interest in buying a home, the supply shortages in most markets are pushing prices higher and currently keeping sales at a standstill. Listings for new and existing homes need to increase in the months ahead to moderate price growth and reignite sales activity.
Mortgage rates moved up over the past week to 4.66 percent, their highest level since May 5, 2011 (4.71 percent).
Mortgage rates so far in 2018 have had the most sustained increase to start the year in over 40 years. Through May, rates have risen in 15 out of the first 21 weeks (71 percent), which is the highest share since Freddie Mac began tracking this data for a full year in 1972.
At a time when housing inventory remains extremely low, it’s worth watching whether these higher borrowing costs lead some would-be sellers to stay put in their current home. Inventory shortages would likely worsen if more homeowners decide not to sell out of reluctance of having a new mortgage with a higher rate.
After plateauing in recent weeks, mortgage rates reversed course and reached a new high last seen eight years ago. The 30-year fixed mortgage rate edged up to 4.61 percent, which matches the highest level since May 19, 2011.
Healthy consumer spending and higher commodity prices spooked the bond markets and led to higher mortgage rates over the past week. Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season.
While this year’s higher mortgage rates have not caused much of a ripple in the strong demand levels for buying a home seen in most markets, inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.
The minimal movement of mortgage rates in these last three weeks reflects the current economic nirvana of a tight labor market, solid economic growth and restrained inflation. As we head into late spring, the demand for purchase credit remains rock solid, which should set us up for another robust summer home sales season.
While this year’s higher rates – up 50 basis points from a year ago – have put pressure on the budgets of some home shoppers, weak inventory levels are what’s keeping the housing market from a stronger sales pace.
Mortgage rates increased for the third consecutive week, climbing 11 basis points to 4.58 percent. Rates are now at their highest level since the week of August 22, 2013. Higher Treasury yields, driven by rising commodity prices, more Treasury issuances and the steady stream of solid economic news, are behind the uptick in rates over the past week.
Despite the increase in borrowing costs, demand for home purchase credit remains solid. The Mortgage Bankers Association reported in their latest mortgage applications survey that activity was up 11 percent from a year ago.
The Federal Reserve raised interest rates today – a much-anticipated move that comes as both U.S. and global economic fundamentals continue to strengthen. The Fed’s decision to raise interest rates by a quarter of a percentage point puts the federal funds rate at its highest level since 2008. The decision, while widely expected, sent the yield on the benchmark 10-year Treasury soaring. Following Treasurys, mortgage rates shrugged off last week’s drop and continued their upward march. The U.S. weekly average 30-year fixed mortgage rate rose 1 basis point to 4.45 percent in this week’s survey.
So far, U.S. housing markets remain resilient in the face of higher mortgage rates. The National Association of Realtors reported this week that existing home sales in February increased 3 percent month-over-month on a seasonally adjusted basis and are up 1.1 percent from a year ago. That momentum is carrying through into spring. In the latest Mortgage Bankers Association’s Weekly Mortgage Applications Survey, the home purchase mortgage applications index was up six percent from the same week a year ago.
The U.S. weekly average for the 30-year fixed mortgage rate rose above 4 percent for the first time since last summer to 4.04 percent in this week’s survey. This is the highest weekly average for the 30-year fixed rate mortgage since May of 2017.
Some may be wondering if this is the last time we’ll see a three handle on the 30-year mortgage rate. Never say never, but inflation is firming, the Federal Reserve’s Beige Book indicates broad-based economic growth and labor markets are tightening. This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.