Mortgage rates post sizable increaseby Tim Manni
Rates on the most popular mortgage types rose considerably according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages increased by 12 basis points (0.12 percent) to 4.61 percent. Conforming 5/1 Hybrid ARM rates rose by seven basis points (0.07 percent), closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.41 percent.
Economy is just strong enough
“The economic data continues to be firm enough to fuel expectations that the Fed will begin tapering its purchases of mortgage-backed securities and Treasury bonds in September,” said Keith Gumbinger, vice president of HSH.com. “The economy may not be all that strong, but there are few indications of significant weakening that could push the date further into the future.”
The Federal Reserve has noted that it will react to new incoming data to determine an appropriate point to begin the process of removing extraordinary monetary support. Absent a spate of truly soft data or a new crisis to address, the relative strength or weakness of a given group of data may only dictate how quickly the process comes to completion.
“There could still be employment, housing or other economic reports which might give the Fed pause,” adds Gumbinger. “However, it is likely that they would need to be truly weak numbers to stop the Fed from beginning the process of returning to a more normal monetary policy.”
Any poor news would need to accumulate quickly, as the Fed meets next in just about a month’s time, notes Gumbinger.
Refinance applications are tanking
Mortgage borrowers again reacted to higher mortgage rates, as mortgage applications decreased during the week ending August 16. According to the Mortgage Bankers Association, mortgage applications were down 4.6 percent from the week prior.
With refinance applications down 8 percent from one week earlier, the MBA reported that, “The Refinance Index has dropped 62.1 percent from the recent peak reached during the week of May 3, 2013.” Refinances now make up 62 percent of all mortgage applications, a slight decrease from the week before.
Purchase applications were up 1 percent and the ARM share of applications is at 6 percent.