Long-term mortgage interest rates climbed to a seven-week high, according to mortgage-backing firm Freddie Mac, rising for the second straight week to a new peak for 2015. And the Mortgage Bankers Association reported that those higher rates reigned in mortgage applications during the same week.
During the week ended February 19, the average rate on a 30-year fixed rate mortgage jumped up to 3.76 percent, excluding fees, up from 3.69 percent the week before. Compared with last year at this time when the average was 4.33 percent, today’s rate is still very low though.
Rising rates were a reaction to a stronger employment report, Freddie Mac noted, in spite of less than encouraging housing data. “Mortgage rates rose for the second consecutive week as 10-year Treasury yields surged,” commented Freddie Mac deputy chief economist Len Kiefer. “Housing starts declined 2 percent to a seasonally adjusted pace of 1.065 million units and housing permits dipped 0.7 percent in January. However, homebuilders remain confident about new home sales although slightly tempered from last month as the NAHB Housing Market Index slipped 2 points to 55 in February.”
Other rates rose as well. The 15-year fixed rate mortgage carried an average rate of 3.05 percent, up from 2.99 percent the week before and the one-year adjustable rate mortgage increased to 2.45 percent, up from 2.42 percent.
The rising cost of mortgage loans scared plenty of Americans away from refinancing in the past week, with the MBA reporting that home loan applications dropped 13.2. The MBA’s refinance index registered a 16 percent decline, bringing the refinance share of all applications down to 66 percent from 69 percent a week earlier.
“Mortgage rates increased to their highest level since the beginning of the year last week, and application volume dropped sharply as a result, particularly for refinances,” explained MBA chief economist Mike Fratantoni. “The market index declined to its lowest level since the week ending January 2nd as purchase application activity decreased seven percent and refinance applications decreased 16 percent. Refinance volume fell particularly for larger loans, as evidenced by the decline of almost $25,000 in the average loan size for a refinance loan,” said Mike Fratantoni, MBA’s Chief Economist.
Even with mortgage rates showing growth in the past two weeks, they are expected to stay near historical lows for much of the year, with forecasts calling for rates to remain below 5 percent through 2015.