Mortgage rates rise off record lowsby Tim Manni
Investor tensions eased somewhat in the past week as fears surrounding the financial health of the eurozone have lifted to a degree. Investors shifted away from safe-haven investments which provided a little boost to interest rates.
According to HSH.com’s latest Weekly Mortgage Rates Radar, rates on the most popular types of mortgages moved upward only slightly over the past week. The average rate for conforming 30-year fixed-rate mortgages rose by two basis points (0.02 percent) to 3.68 percent. Conforming 5/1 Hybrid ARM rates increased by three basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.76 percent.
“Mortgage rates moved a little higher this week, following other interest rates upward,” said Keith Gumbinger, vice president of HSH.com. “Most of the move in the markets can be attributed to Mario Draghi, the president of the European Central Bank (ECB), who stated that the ECB ‘is ready to do whatever it takes to preserve the euro’. In turn, this helped ease some of the tension and fear which have been pushing stock and bond markets around for months; as a result, and temporarily at least, some investor money shifted away from safe havens, pushing bond yields and rates a little higher.”
Interest rates may also have firmed a little on growing speculation that the Federal Reserve is becoming more likely to make a move to foster economic growth.
“The Fed closes their latest meeting today,” noted Gumbinger, “and while there isn’t a strong likelihood of an immediate move, there is always a possibility that one may unexpectedly come, and the Fed has several options to pursue if they wish.”
Considerable uncertainty looking forward
Back in June when we published our latest Two-month forecast for mortgage rates, we knew we were in store for a weak economy for at least July, possibly followed by a little improvement later in August. The fiscal troubles in Europe certainly helped send mortgage rates to new lows here in the U.S. Unfortunately, at the moment at least, this latest improvement can only be seen as temporary.
“It is an election year and November is not all that far in the distance,” wrote Gumbinger in the latest forecast. “With the Fed’s decree, the election will shortly be followed by the end of Operation Twist (again) and a looming fiscal mess here soon thereafter, with automatic spending cuts and tax changes aplenty slated for 2013. Facing these issues and challenges, and given the economic headwinds, the question is whether and how much the economy can strengthen between now and then. Conditions which would push GDP back closer to 3 percent than 2 percent seem unlikely, but even a few tenths of a percentage point improvement would look pretty good right now.”