A build up in inflationary pressures, reflected in the Beige Book and conveyed by some relatively hawkish FOMC member chatter saw 10-year Treasury yields hit the highest level in 4-weeks, driving the 30-year fixed-rate mortgage average to 4.47%, the highest since Jan-14.
There may have been a soft patch in the economy through the 1st quarter, but last week’s economic data suggested that it was just a soft patch and nothing more concerning, with retail sales bouncing back at the end of the quarter.
For now, the acceleration in the pace of wage growth should avoid a material decline in mortgage applications, though a tightening in the approval process will have some influence should mortgage rates continue to move towards 5%.
The continued demand for homes will provide further support to the housing sector, with the impact of limited supply and rising mortgage rates likely to ultimately see a shift in the housing sector and demand for mortgage applications and new homes. We’re not there yet, however, with mortgage rates still well below historical averages, but it will become an issue should the upward trend in mortgage rates persist in the coming weeks.
Freddie Mac rates for new mortgages last week were quoted to be:
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30-year fixed rate loan rose from 4.42% to 4.47% last week, while up from 3.97% a year ago.
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15-year fixed rates jumped from 3.87% to 3.94% last week, while up from 3.23% from a year ago.
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5-year fixed rates increased from 3.61% to 3.67% over the week, while up from last year’s 3.10%.
Average interest rates for 30-year fixed, backed by the FHA increased from 4.66% to $4.70%, moving back towards the 7-year high hit last month, while the average interest rate for 30-year fixed with conforming loan balances remained unchanged at 4.66%, continuing to move around a 4-year high. 30-year rates for jumbo loan balances held steady at 4.53%, following the previous week’s fall.
Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, increased by 4.9% week-on-week, more than reversing the previous week’s 1.9% fall.
The Refinance Index was also on the rise, up 4% from the previous week, reversing the previous week’s 2% fall and bringing to an end the recent downward trend that contributed to the refinance share of mortgage activity hitting the lowest level since Sept-08.
In spite of the rise in the Refinance Index, the refinance share of mortgage activity fell from 38.4% to 37.6% of total applications, continuing to sit at the lowest level since Sept-08.