Mortgage interest rates worsened last week, pushing pricing to its worst levels since late-April.
Conventional mortgage rates had been hanging near 4.10%. This week, they open closer to 4.25%.
The rise in rates is bad news for HARP mortgage applicants and other refinancing households who now will now face higher loan costs and fewer opportunities to save money; as well as for today's home buyers who have yet to lock a mortgage rate.
Rates also worsened for FHA loans, VA mortgages, and USDA home loans.
Freddie Mac reported 30-year fixed rate mortgage rates rising 0.02 percentage points to 4.12% last week nationwide. The rate was available to borrowers willing to pay 0.5 discount points at closing, plus normal closing costs.
Discount points are optional, one-time closing costs. 1 discount point comes at a cost equal to one percent of your loan size such that 0.5 discount points costs $500 per $100,000 borrowed.
However, because Freddie Mac's survey is conducted during the early part of the week, it failed to capture the changes in mortgages from Wednesday afternoon through Friday's market close.
Mortgage rates rose by quite a bit in last week's back-half. Mortgage rate shoppers trying to lock a mortgage rate may see rates closer to 4.25 percent, overall.
Regardless, as compared to the start of the year, today's mortgage rates are pretty excellent.
Recall that on January 1, 2014, mortgage rates were at a 16-week high. Rates had been moving higher as the domestic economy showed signs of improvement; as global markets were expanding; and, as the Federal Reserve prepped to reduce its market stimulus footprint.
Since then, however, the U.S. economy has mostly side-stepped and key global economies such as China have shown signs of a slowdown. In addition, conflict in Ukraine and in various parts of the Middle East have weighed on markets. These events have sparked a bout of safe-haven buying, which has benefitted U.S. mortgage bonds.
If you're shopping for a mortgage or looking for the lowest rate, then, be sure to compare lender pricing. During tumultuous times, mortgage rates will often vary between banks.
Despite Freddie Mac's survey, some mortgage lenders offer rates in the 3s.
Since the start of the year, mortgage rates have moved steadily and slowly downward. 30-year mortgage rates averaged 4.53% on January 1, and had moved to 4.12% by last week.
This week opens with mortgage rates higher, but that could change by mid-week. This is because, at 2:00 PM ET Wednesday, the Federal Open Market Committee (FOMC) will adjourn from its sixth scheduled meeting of the year -- a two-day, closed-door affair which begins Tuesday morning.
Don't expect the Federal Reserve to move "off-course".
The group will likely vote to keep the Fed Funds Rate within its current target range near zero percent, where it's been since December 2008; and it will likely move to "taper" its third round of quantitative easing (QE3) by another $10 billion.
A $10 billion taper would be the Fed's six such taper since January months, and would reduce the cumulative size of QE3 to $25 billion.
In theory, reducing the size of QE3 would lead mortgage rates higher. However, since the QE3 taper began, mortgage rates have managed to drop; the result of safe-haven buying and a smaller pool of available mortgage bonds.
Investors are buying U.S. bonds at a faster pace than the Fed can exit the market.
Incidentally, a similar pattern emerged when the original QE ended in 2009, and when QE2 ended two years later. Mortgage rates fell despite analyst calls for an increase.
Mortgage rates have dropped close to 0.375 percentage points since the QE3 taper started.
Mortgage rates will have ample opportunity to move this week -- up or down. The economic calendar is stacked, and it includes a meeting of the Federal Open Market Committee.
Any time the Fed meets, mortgage rates can bounce.
The complete weekly calendar is as follows :
Rate shoppers should also be attuned to Federal Reserve Chairman Janet Yellen's post-FOMC meeting press conference. The Chairman will face questions from members of the press and her answers typically influence the future direction of mortgage rates.
In general, comments which suggest that the U.S. economy is slowing, or that inflation rates are expected to remain low, may result in mortgage rates moving lower. By contrast, comments indicated a strong U.S. economy and high rates of inflation would lead mortgage rates up.
It's been a good few weeks for mortgage rates. Pricing has improved from the start of the year and may continue to drop into fall. Or, after the Fed meeting, we may discover that the Fed is intent on guiding rates higher.
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The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.