Mortgage Rates Fall for 6th Straight Week
Mortgage rates for most U.S. home loans have fallen for the sixth straight week, although a majority of analysts predict rates will start to increase soon with the upcoming release of the latest unemployment data.
Key averages have seen steady declines since the beginning of January and saw a drop this week after economic reporting showed a cooling in home sales for the month of December.
This week the average for a 30-year fixed-rate mortgage dropped to 4.23 percent, down from 4.32 percent last week, according to the latest survey from mortgage buyer Freddie Mac. At the beginning of January, the same loans averaged an interest rate of 4.53 percent. A year ago, the 30-year average was 3.53 percent – a year-over-year increase of 0.7 percentage point.
The average rate on a 15-year fixed loan also dropped this week, falling to 3.33 percent from 3.40 percent last week. It averaged 3.55 percent at the beginning of this year, and was at 2.77 percent a year earlier.
Additionally, averages for the two most popular hybrid adjustable-rate mortgages fell. At 3.12 percent a week ago, the five-year ARM is now trending at 3.08 percent. A year ago, it averaged 2.63 percent. The one-year ARM dropped to 2.51 percent from 2.55 percent a week ago. It averaged 2.53 percent at this time last year.
“Mortgage rates fell further this week following the release of weaker housing data,” Frank Nothaft, vice president and chief economist for Freddie Mac, said in a statement. “The pending home sales index fell 8.7 percent in December to its lowest level since October 2011. Fixed residential investment negatively contributed to GDP in the fourth quarter for the first time since the third quarter of 2010. Also, the Institute for Supply Management reported a significant slowing in growth in the manufacturing industry in December than the market consensus forecast.”
Mortgage rates had been rising steadily in December after the Federal Reserve announced it would begin to curb its bond-buying stimulus program in January. However, rates have eased over recent concerns that the market would not be able to support a dramatic upward shift in home prices.
The bond-purchase program has helped offset dramatic gains in real estate prices and kept affordability elevated while the market has stabilized. Despite the recent economic reporting, the housing market at large continues to show signs of recovery.
Looking ahead, rates may rise in the short-term as a result of the upcoming January employment report. In the latest Mortgage Rate Trend Survey by Bankrate.com, half of the analysts polled believe averages will increase over next week, while 33 percent believe rates will hold steady.
“I predict that the January employment report, to be released Feb. 7, will be stronger than expected, especially if you include the revisions to the December numbers,” said Bankrate.com Assistant Managing Editor Holden Lewis. “Non-farm payrolls will be better than expected; the unemployment rate could actually go up. A higher unemployment rate would imply continued low inflation, but the market might not interpret it that way. Money will flow from bonds to stocks, resulting in higher bond yields and mortgage rates.”
Feb 6, 2014
By: Neal J. Leitereg for Realtor.com