The 30-year fixed-rate average is at its highest level in seven years.
Mortgage rates continued their upward march this week, extending the most prolonged increase in rates in 46 years.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.66 percent with an average 0.4 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.61 percent a week ago and 3.95 percent a year ago.
The 15-year fixed-rate average jumped to 4.15 percent with an average 0.4 point. It was 4.08 percent a week ago and 3.19 percent a year ago. The five-year adjustable rate average rose to 3.87 percent with an average 0.3 point. It was 3.82 percent a week ago and 3.07 percent a year ago.
What you need to know
“Mortgage rates so far in 2018 have had the most sustained increase to start the year in over 40 years,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Through May, rates have risen in 15 out of the first 21 weeks (71 percent), which is the highest share since Freddie Mac began tracking this data for a full year in 1972.”
The Federal Reserve released the minutes from its May 2 meetings earlier this week. Officials indicated they are unlikely to hasten increases to their benchmark rate. The next interest rate hike is expected in June.
“The minutes suggest that the [Federal Open Market Committee] remains committed to a gradual withdrawal from the remnants of its crisis-era policies, rather than a more aggressive withdrawal as had been suggested in several recent speeches,” said Aaron Terrazas, senior economist at Zillow. “Absent any geopolitical surprises, financial markets should be quiet going into the long holiday weekend, but expect more movement next week leading up to next Friday’s jobs report.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly half of the experts it surveyed say rates will rise in the coming week. Shashank Shekhar, CEO at Arcus Lending, disagrees. He expects rates to remain unchanged following the holiday weekend.
“After touching a seven-year high, mortgage rates expectedly went down a tad last week,” Shekhar said. “However, there is no reason for that downward trend to continue to anything significant. The Fed is still expected to raise the rate again in June with odds currently split between the probabilities for three or four increases for the year as a whole. With no major policy change expected from Fed and a short week because of Memorial Day, should mean a mostly stable market with mortgage rates not changing much for the week.”
Meanwhile, mortgage applications declined again last week, according to the latest data from the Mortgage Bankers Association. The market composite index – a measure of total loan application volume – decreased 2.6 percent from a week earlier. The refinance index fell 4 percent, while the purchase index dropped 2 percent. The refinance share of mortgage activity accounted for 35.7 percent of all applications.
“As a result of rising rates, refinance applications continued to decrease, with our refinance index hitting its lowest level since December 2000,” said David Stevens, MBA president and CEO. “Purchase applications decreased over the week, but the average loan amount for purchase loans increased to over $320,000 after averaging around $317,000 for the past four weeks, likely a sign that inventory for lower priced homes remains low and the mix is still skewed toward larger loan balances,.” said David Stevens, MBA president and CEO.