The good news is that our troubled economy is getting healthier. But the not-so-good news is that the days of historically-low mortgage rates might be coming to an end. Here’s why: For quite a while now, the Federal Reserve has been stimulating the economy by keeping interest rates artificially low. In fact, rates on 30-year mortgages dropped to a record low of 4.78% earlier this year, but have slowly moved up to above 5% since June. One of the ways the Fed has kept rates low was by buying up mortgage-backed securities. But now the money is running out, and that means that rates may be on the rise.
Here’s an idea – check out the title of this post that you’re reading.
Yep – mortgage rates jumped for the second consecutive week according to the weekly Primary Mortgage Market Survey from Freddie Mac. You would have to track all the way back to March 15 and March 22 for the last time that happened.
I’ve been saying all along that you can’t expect mortgage rates to bottom out where they were sitting forever. They were bound to go up eventually and it looks like they’re trending in the northward direction right now.
Let’s crunch some numbers here.
30-year fixed-rate mortgages jumped to 3.59% with 0.6 points from last week’s 3.55% with 0.7 points. In a two-week span, the nation-wide average for 30-year fixed-rate mortgages climbed 0.10%. Last year at this time, 30-year fixed-rate mortgages averaged 4.32%, so we’re still down significantly from 12 months ago.
15-year fixed-rate mortgages also climbed higher to 2.84% with 0.6 points from last week’s 2.83% with 0.6 points. A small gain, but a gain nonetheless. The good news is that the streak of being below 3.00% continues for another week. Last year at this time, 15-year fixed-rate mortgages averaged 3.50%.
5/1-year ARMs jumped from 2.75% with 0.6 points last week to 2.77% with 0.6 points this week, while 1-year ARMs fell to 2.65% with 0.4 points from last week’s average of 2.70% with 0.4 points.
Last year at this time, 5/1-year ARMs and 1-year ARMs averaged 3.13% and 2.89%, respectively.
Our good friend Frank Nothaft, vice president and chief economist from Freddie Mac, probably had a lot to say with mortgage rates jumping across the board for the second week, right? Well, Frank did it the only way Frank knows how.
He explained, “Fixed mortgage rates inched up again this week following stronger-than-expected employment reports. The economy added 163,000 jobs in July, well above the market consensus forecast of 100,000, and the largest increase since February. In addition, the number of announced corporate layoffs fell 45% in July compared to last July and was the third time this year that announced layoffs were less than the same month in 2011 according to the Challenger Report. This suggests further net gains in employment are likely in the near future.”
I’m a firm believer that numbers don’t lie. Mortgage rates are on their way up. I heard a great analogy the other day – passing up mortgage rates this low would be like finding a huge bag of money on the side of the street and leaving it there because you think you’ll find a bigger bag of money down the block.
If you want to refinance or get a mortgage, there is not a better time than now. Don’t miss out!