Depressed Treasury yields have kept mortgage rates under 3% recently, but positive economic news could indicate larger increases will follow this week’s uptick.
After three weeks of declines, the average 30-year fixed rate mortgage rose to 2.98% from 2.97% the week before in the latest Freddie Mac Primary Mortgage Market Survey. The 30-year FRM averaged 3.23% this time a year ago. The government-sponsored enterprise projected the 30-year FRM will climb to 3.4% by the end of 2021 and 3.8% by the end of 2022 in its first quarter forecast.
Federal Reserve chair Jerome Powell’s statement this week about having no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities put downward pressure on Treasury bond yields, likely generating the only modest shift, Zillow economist Matthew Speakman said in a statement. However, that restrained growth may be short-lived with the anticipation of forthcoming positive economic news.
“Looking ahead, with a slew of key economic reports on the horizon — including consumer spending and inflation data — the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements,” Speakman said.
The average 15-year FRM also increased to 2.31% from 2.29% the week earlier while down from 2.77% one year ago. Meanwhile, only the 5-year Treasury-indexed adjustable rate mortgage dropped significantly to an average of 2.64% from 2.83% one week prior and from 3.14% annually.
Despite low interest rates, which normally encourage refinancing borrowers and potential homebuyers, originations remain down. The frenzied refinance activity over the past 12 months could be limiting further growth in that loan type, while extremely low housing supply creates fierce competition for fewer properties and discourages would-be sellers who are concerned about snagging their next home.
“For eager buyers, especially first-time homebuyers, inventory continues to be extremely tight and competition for available homes to purchase remains high,” Freddie Mac chief economist Sam Khater said in a press release.
Originally Appeared On: https://www.nationalmortgagenews.com/news/mortgage-rates-rise-with-positive-economic-news-on-horizon