For the fifth week in a row, home mortgage rates have climbed and are expected to keep going in the upward direction.
The average rate on a 30-year fixed-rate mortgage went up another 10 percentage points to 3.91% this week. They are up from 3.3% in early May, according to Freddie Mac. Meanwhile, 15-year loans received an average rate of 3.03%, up from 2.56%, a record low.
“It’s unlikely that rates will ever be that low again,” Doug Duncan, Fannie Mae’s chief economist told CNN Money.
In a press release, Frank Nothaft, VP and chief economist for Freddie Mac remarked:
“Continuing market concerns that the Federal Reserve may slow its bond purchases amid a strengthening economy added upward pressure on mortgage rates this week. In its June 5th regional economic conditions report, known as the Beige Book, the Federal Reserve noted that overall economic activity increased at a modest to moderate pace over April and May in all its districts except for Dallas which indicated strong economic growth. In addition, pending home sales rose in April to its fastest pace since April 2010 and May’s consumer sentiment was revised upwards to its highest reading since July 2007.”
Mortgage rates are at their highest level in 14 months and because of that, mortgage applications have started to fall.
A mortgage applications for refinancing fell 15% in the week ending May 31 to the lowest level since November 2011. Meanwhile, purchase applications went down 2%, according to the Mortgage Bankers Association’s weekly report.
Refinancing makes up most of the mortgage activity at 68% of total applications.
While applications have started to drop, cheaper mortgage rates have helped boost home sales and prices this past year. Economists believe this rise in rates might help spur more potential homebuyers into action before the rates get too high. In return, it’s helped strengthen the housing market into a recovery that’s been going since 2012.
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