Mortgage rates go up slightly for the third week in a row
The average interest rate on 30-year home loans edged up for a third consecutive week, Freddie Mac reported Thursday, but economists expect the Federal Reserve’s stepped-up bond-buying campaign to keep mortgage costs near record lows in the coming months.
This week lenders were offering 30-year fixed-rate mortgages at an average rate of 4.24% with upfront fees equal to 0.8% of the amount borrowed, according to Freddie Mac’s survey. The average rate was up from 4.23% last week and from 4.19% three weeks ago, which was the lowest rate recorded since Freddie Mac began surveying lenders in 1971.
Fifteen-year fixed-rate loans, a popular choice for people refinancing their mortgages, were being offered at an average rate of 3.63% with 0.7% in upfront fees, down from 3.66% a week earlier.
The Fed, aiming to stimulate growth by driving down long-term interest rates, said Wednesday that it would purchase an additional $600 billion in Treasury bonds by the middle of next year.
In response, the yield on the 10-year Treasury bond, a benchmark for long-term mortgage rates, dropped to 2.48% on Thursday from 2.59% on Wednesday. The 10-year T-note yielded about 3% in early August and about 3.5% in early May.
Rates on fixed-rate mortgages will probably remain about level through the spring, said Mark Zandi, chief economist at Moody’s Analytics.
“I would expect rates to move higher by next summer as the recovery begins to gain traction,” he said.
In the meantime, 30-year fixed-rate loans represent an extraordinary opportunity, said Dan Seiver, a San Diego State University finance professor.
“It wouldn’t surprise me at all if inflation picked up to 3% to 4% over much of the next 30 years, making the [inflation-adjusted] interest rate close to zero,” he said.
The low mortgage rates, however, are of little benefit to the many borrowers whose earnings and credit ratings have been buffeted by the deep recession, or to homeowners who can’t refinance because their home values have fallen so far.
For the housing market, the Fed’s actions amount to “pushing on a string” because lending standards remain tight, said Laguna Niguel mortgage broker Jeff Lazerson.
“The better answer,” he said, “would be to loosen up on underwriting standards a little bit.”
