Mortgage Rates Edge Higher on Improved Economic Conditions
(Best Syndication News) Mortgage interest rates continued to increase on expectations that the Federal Reserve will slow their stimulus programs. The same pressure has put downward pressure on the Dow Jones Industrial Average (INDEXDJX:.DJI) since the August 2nd high of 15,658.
Freddie Mac said the average 30-year fixed rate mortgage jumped 0.7 basis points (bps) this week. Their Primary Mortgage Market Survey® (PMMS®) indicated that rates have been trending higher since April (see the graph). The current 30-year fixed-rate mortgage (FRM) averaged 4.57 percent.
Finance and refinance applications are higher, according to the Mortgage Bankers Association (MBA). Application volume increase 1.3 percent on a seasonally adjusted basis from one week earlier, but their seasonally adjusted Purchase Index decreased 0.4 percent. Sixty one percent of that volume increase came from refinance activity, according to the association.
The U.S. Treasury Department said that the 10-year note yield, a common benchmark used by lenders to adjust their mortgage interest rate, jumped to 2.98 percent on September 5, 2013.
The improving economy is responsible for higher rates, according to Freddie Mac. “Mortgage rates edged up this week on signs of a stronger economic recovery,” said Frank Nothaft, vice president and chief economist.
“Real GDP was revised upwards to 2.5 percent growth in the second quarter of this year. In addition, residential construction spending rose for a ninth consecutive month in July. Lastly, the manufacturing industry expanded by the fastest pace in August since June 2011.”
Meanwhile, the Obama Administration is considering a replacement for outgoing Federal Reserve Chairman Ben Bernanke. Although there is some uncertainty regarding the next leader, the economy does appear to be improving.
In their Beige Book, a summary of the economy released eight times per year, the central banks said that prices are increasing, although “subdued.” Pent-up demand is also driving up auto sales and travel.
“Activity in residential real estate markets increased moderately,” the Fed said in their report. “Lending standards were largely unchanged, while credit quality improved.”
By: John Waters
Graph: Historical 30-year rate since January 2010