Real Estate & Area News

Mortgage Rates Up from Lows of the Year

US mortgage insurer Freddie Mac reported Thursday that mortgage rates rose slightly this week after hitting their lowest levels of the year a week ago. The average rate for a 30-year, fixed-rate home loan this week was 3.98 percent, up from the 3.92 percent average that was the lowest reported by the mortgage giant since June 2013. Despite the increase, however, this week's average is still more than half a percentage point lower than rate seen at the beginning of the year. Insiders expect rates to continue climbing, as the Federal Reserve continues to unwind its stimulus programs aimed at keeping rates lower. Known as quantitative easing, the program entails monthly purchases of billions of dollars in government bonds, applying downward pressure to the bond yields. Interest rates closely track the yield on the 10-year Treasury note, so lower yields translates to lower interest rates.

Just like the 30-year mortgage, the most common loan type used in home purchases, the the 15-year home loan often used to refinance home loans also rose this week, climbing from 3.08 percent to 3.13 percent this week. The 15-year mortgage has seen a boost in popularity over the last few years as homeowners locked into higher rates since before the recession sought lower rates to save on monthly mortgage payments. The Mortgage Bankers Association reported earlier this month that requests for refinance loans rose a staggering 23 percent in the week ended October 17th, though they fell back by 7 percent in the following week.

While declining interest rates in recent years could be attributed to the Fed's efforts, the declines in recent weeks are more closely tied to global economic concerns. High-profile issues such as the Ebola outbreak and conflicts in the Middle East and Europe have been making investors nervous, prompting many to pull back on stock investments and seek the relative safety of bond purchases. As with the Fed's stimulus program, this activity drives up bond prices, lowering their yields, which leads to lower rates. The impact of the quantitative easing program, meanwhile, has been diminishing in recent months as the Central Bank has been decreasing the amount of bond purchases in recent months.

Like both popular fixed-rate mortgage types, Freddie said that both adjustable-rate mortgage types saw rate increases this week. The five-year adjustable-rate mortgage, or ARM, rose from 2.91 percent to 2.94 percent, while the average rate for a one-year ARM edged up from 2.41 to 2.43 percent.

October 30, 2014