Mortgage Rates Rising : Fundamentals Or Seasonal?

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via: TheMortgageReports.com/DanGreen

 

Mortgage rates have jumped over the last 10 days. Conforming mortgage rates, FHA mortgage rates, VA mortgage rates -- everything is up. It's the result of an improving U.S. economy, a risk-hungry Wall Street, and a simple Federal Reserve statement saying the turnaround may be closer than we think. Or is it?

Mortgage rates are rising, that's for sure. But, maybe that's because it's spring.

 

Mortgage Rates Highest In 5 Months

Government mortgage-backer Freddie Mac compiles and publishes a weekly "national mortgage rate", the result of a 125-bank survey of current mortgage rate conditions.

This week's mortgage rate survey shows that, within just a few days, mortgage rates leaped from historical lows straight to their highest levels since October of last year.

Mortgage rates increases across the board last week :

• 30-year fixed rate mortgage : 4.08 percent, up 0.16 from the week prior
• 15-year fixed rate mortgage : 3.30 percent, up 0.14 from the week prior
• 5-year adjustable rate mortgage : 2.96 percent, up 0.13 from the week prior

In order to get these mortgage rates, though, Freddie Mac said mortgage applicants should expect to pay big fees. The Freddie Mac "average" mortgage rates are only available with 0.8 discount points paid at closing plus a complete set of closing costs. This means that some people pay more than Freddie Mac's average amount, and some pay more.

In both cases, mortgage fees are higher as compared to 5 months ago.

 

Are Mortgage Rates Seasonal?

The mortgage rate run-up started after the Federal Reserve's March 13 statement in which it said the U.S. economy may be expanding faster than previously expected. This triggered an equity market rally, which occurred at the expense of mortgage-backed bonds.

At the same time, there has been a series of "positive" news for the U.S. economy. The jobs market is coming back; housing shows life; the Eurozone appears to be making progress with its sovereign debt problems. Oil prices are rising.

If these stories sound familiar, it's because we talked about them in March 2010, and in March 2011 as well.

Hope springs eternal, it seems -- especially in Spring. Unfortunately for mortgage rate shoppers in places like Dallas, Texas; Orange County, California; and Outer Banks, North Carolina, when Wall Street feels hope, mortgage bonds lose. It's why mortgage rates have raced higher since last week.

 

Hope can fade, though, and in 2010 and 2011, it did. In 2010, the April volcanic eruption of Eyjafjallajökull in Iceland interrupted European economic output, putting mortgage rates on a multi-month downward trajectory.

In 2011, Greece and its debt issues resurfaced in May, which played a large role in driving U.S. mortgage rates down until early-2012.

Could the optimism of March 2012 vanish by April? Could mortgage rates resume falling? Of course they could.

 

See Today's Mortgage Rates

If you're shopping for a mortgage -- either for HARP, for the FHA Streamline Refinance, for a home purchase, or just to refinance -- expect for mortgage rates to change frequently. The rates you're quoted today may not be valid tomorrow.

Such is the nature of the mortgage rate market. Stay current on mortgage rates and be wary of change. Especially now that it's spring.