Mortgage Rates Up Slightly, But Likely to Hold Under 4% for Months

Mortgage Rates Up Slightly, But Likely to Hold Under 4% for MonthsAverage fixed mortgage rates nudged higher this week, as the 30-year fixed rate starts a second year below 4 percent — moving from 3.54 percent last week to 3.57 percent, according to Freddie Mac.
The slight increase should not be a concern in the short term, although many market analysts say rates should slowly climb toward 4 percent by the end of this year as the housing market continues to strengthen.
Last week, the 30-year fixed rate marked its first year under 4 percent. Last November, the long-term rate set its all-time average low at 3.31 percent.
The Federal Reserve, meanwhile, is committed to its asset-purchase programs with the intent of keeping long-term borrowing costs down and spurring investment.  The central bank’s federal funds rate — the overnight rate it charges for bank-to-bank loans — has been at “zero to 0.25 percent,” an historic low, since December 2008.
There is no doubt that historically low rates have invigorated home sales and refinancing, in turn helping bolster home prices to double-digit, year-over-year growth in many U.S. cities.
Existing home sales over January and February saw the strongest two-month pace since November 2009, while new home sales were the strongest since August and September 2008.
The Mortgage Bankers Association said Wednesday that mortgage applications for both purchases and refinancing surged 8 percent last week compared to the previous week. The refinance share of mortgage activity remained unchanged at 75 percent of total applications.
The National Association of Realtors said Wednesday that mortgage interest rates should remain within a tight range for months, but trend upward slowly and possibly reach 4 percent in the fourth quarter.
“The number of consumers expecting to purchase a home over the next six months rose to 5.6 percent in March, the second highest share since data was first collected in February 1964, according to The Conference Board,” said Frank Nothaft, vice president and chief economist, Freddie Mac.
Here is Freddie Mac’s overview of rates:

  • 30-year fixed-rate mortgage averaged 3.57 percent, with an average 0.8 point for the week ending March 28, 2013, up from last week when it averaged 3.54 percent. Last year at this time, the 30-year FRM averaged 3.99 percent.
  • 15-year fixed rate averaged 2.76 percent, with an average 0.7 point, up from last week when it averaged 2.72 percent. A year ago at this time, the 15-year fixed rate averaged 3.23 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.68 percent this week, with an average 0.6 point, up from last week when it averaged 2.61 percent. A year ago, the 5-year ARM averaged 2.90 percent.
  • 1-year Treasury-indexed ARM averaged 2.62 percent this week, with an average 0.3 point, down from last week when it averaged 2.63 percent. At this time last year, the 1-year ARM averaged 2.78 percent.

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