Mortgage rates moved a little higher last weekby Tim Manni
As we move closer to summer (Tuesday marks the official start of the season), the economic outlook isn’t expected to improve all that much, and neither are mortgage rates. Yet an improvement in mortgage rates can mean different things to different people.
As we’ve mentioned several times before, unchanged or even falling mortgage rates, while largely a byproduct of the flagging national economy, have continued to provide tremendous opportunities to would-be homebuyers or refinancers.
On the other hand, just as we mentioned above, persistently-low mortgage rates are, to a point, an expression of a stagnant economy, one made of up of too few jobs, too few home sales and not enough happy consumers.
So, perhaps last week brought us some news both sides could find tolerable: mortgage rates managed a slight increase–not enough to ruin a great rate lock opportunity for a buyer or refinancer, and perhaps the first sign that mortgage rates have fallen about as much as they can, signaling some solid ground for the economy to build upon:
HSH.com’s broad-market mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages rose by two basis points last week, landing at an average of 4.77%.
FHA-backed 30-year fixed-rate mortgages are arguably driving whatever sales of homes to first-time homebuyers are occurring, and also give low-equity refinancers an option to pursue. Rates for these products moved four basis points higher to close the week at 4.44%.
Given the wide differential in interest rates, at least some borrowers should be considering hybrid 5/1 ARMs; whose five-year fixed periods now average just 3.39%, up just three hundredths of a percentage point from the week prior. Certainly, there are savings to be had for borrowers willing to accept some future interest-rate risk.
A lot riding on the Fed
The Federal Reserve’s FOMC meets this week to discuss, perhaps most importantly, how to properly exit from the various programs and “policy accommodations” they have implemented over the past couple years. Steering the markets back to a place where they no longer depend or interact with the various support programs will be no easy task and we’re still not sure how the markets will react.
Minutes of the last Fed meeting suggested that there was a lot of conversation to this regard, but the outlook has changed over the last six weeks, and not for the better. It is likely that this meeting will feature more concrete planning on how the Fed will extricate itself—agreeing in principle on which levers to pull and in what sequence—but the timing of any actions will be left for future consideration.
With optimism flagging and economic expectations being ratcheted down to a great degree, mortgage rates have probably fallen about as far as they can at the moment. Given present levels for rates, and if they hold, entering the summer doldrums might give some folks a chance to refinance or even buy a home before heading to the beach.
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Looking for a more long-term rate forecast? Be sure to check out our Two-month forecast for mortgage rates.