Mortgage rates still moving higherby Tim Manni
Rates on the most popular types of mortgages moved higher, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages rose by eight basis points (0.08 percent) to 3.61 percent. Conforming 5/1 Hybrid ARM rates increased by two basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.59 percent.
“Underlying interest rates are moving higher, dragging mortgage rates along with them,” said Keith Gumbinger, vice president of HSH.com. “This has come as the result of somewhat better conditions in the labor market, helping investors feel more confident that the recovery will overcome its recent soft patch.”
Although not a surprise, the Federal Reserve has now reportedly developed a plan to slow purchases of mortgage-backed securities and Treasury bonds at some point, tapering those purchases as the economy becomes increasingly healthy. The presence of this plan is causing investors to move money back into riskier investments, such as stocks, much as they did in January and February, as some believe the end of these extraordinary supports may be nearer than not.
“The Fed only recently announced that it might even consider increasing the size of QE3, not tapering it”, adds Gumbinger. “With inflation low and the economy still stumbling along, there’s no reason to worry that these support programs will end anytime soon, but it is prudent to have a plan in place for when the time comes.”
Mortgage rates up, applications down
Once again, the weekly mortgage applications report reflected the weekly movement in mortgage rates from the week prior. For the week ending May 10, HSH.com reported that economic optimism gave way to higher mortgage rates, reversing a trend that found record lows just the week before.
The Mortgage Bankers Association’s Market Composite Index, a weekly measurement of mortgage application volume, fell by 7.3 percent for the week ending May 10. The purchase share of applications was down 4 percent and the refinance index fell by 8 percent.
Refinances continued to make up 76 percent of all mortgage applications.