After two straight weeks of declines in mortgage rates, the trends have reversed, with rates moving higher this week to hit the second highest level in 2018.
According to Freddie Mac, the mortgage rate on a 30-year fixed-rate loan hit 4.62%, up from 4.54% last week. A year ago, the average mortgage rate on a 30-year fixed-rate loan stood at 3.91%. Meanwhile, the average rate on a 15-year fixed rate loan hit 4.07%, up from 4.01% last week. A year ago, that rate stood at 3.18%. Freddie Mac noted that the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.83% this week, which is up from 3.74% last week. The rate stood at 3.15% at the same time a year ago.
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“The 30-year fixed-rate mortgage climbed eight basis points to 4.62%, and the Federal Reserve Board on Wednesday raised the federal funds rate by 25 basis points,” said Sam Khater, chief economist at Freddie Mac. “The good news is that the impact on consumer budgets will be smaller than past rate hike cycles. That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements.” The economist noted that, with inflation continuing to “firm” and borrowing costs moving higher, stronger growth in wages would go a long way in helping consumers offset the increases in home property prices and mortgage rates.
With mortgage rates restarting their ascent, applications for new mortgages are on the decline. The Mortgage Bankers Association’s Weekly Mortgage Application Survey showed that loan volume decreased 1.5% on a seasonally adjusted basis for the week ending June 8 compared with a week earlier. The results included an adjustment for the Memorial Day holiday. On an unadjusted basis, loan applications increased 9% compared with a week earlier.
The Refinance Index declined 2% week over week, while it increased 9% on an unadjusted basis. With interest rates rising again, more existing homeowners are losing the chance to refinance into a cheaper mortgage. The Mortgage Bankers Association said that the refinance share of mortgage activity remained unchanged from a week earlier, representing 35.6% of all applications. Meanwhile, adjustable-rate mortgages decreased to 6.8% of all loan applications.