Mortgage Rates Higher as Economic Factors Favor Fed Rate Hike

A mostly positive jobs report Friday bolsters the chance of a nudge upward on a key short-term interest rate by the Federal Reserve next month. For now, average mortgage rates stayed in mostly historically low territory this week, but they could be creeping higher in coming weeks.
For borrowers looking to buy a home or refinance, the interest rate landscape is still very favorable. Freddie Mac said this week that the average 30-year fixed rate mortgage edged up to 3.54 percent for the week ending Nov. 3, 2016, up from last week when it averaged 3.47 percent.
It may not seem like much of a jump, but those 7 basis points to 3.54 percent represent the largest one-week increase in over six months, says Sean Becketti, chief economist, Freddie Mac.
“A jump last week in the PCE — the price index tracked most closely by the Fed — raised the prospect that inflation might not be completely dead after all,” said Becketti. “Investors reacted by driving the yield on the 10-year Treasury to its highest point since June.”
Any prospect of inflation, plus a jobs market that continues to grow, adds to a greater probability that the Fed will bump up it’s federal funds rate another notch, which would mark the policy makers’ second such move since the financial crisis eight years ago.
A move up in the benchmark short-term rate by a quarter of a point, as is anticipated, should not have a big, immediate move on mortgage rates. But the future trajectory of borrowing rates is more likely to be higher in coming months, as long as the economic recovery stays on track.
Here is a overview of Freddie Mac’s average interest rates for the week:
30-year fixed-rate mortgage (FRM) averaged 3.54 percent, with an average 0.5 point for the week ending November 3, 2016, up from last week when it averaged 3.47 percent. A year ago at this time, the 30-year FRM averaged 3.87 percent.
15-year FRM this week averaged 2.84 percent, with an average 0.5 point, up from last week when they averaged 2.78 percent. A year ago at this time, the 15-year FRM averaged 3.09 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.87, with an average 0.4 point, up from last week when it averaged 2.84 percent. A year ago, the 5-year ARM averaged 2.96 percent.

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