With rising current mortgage rates, the speed of economic recovery is once again in question. Potential home-buyers faced a fourth straight week of rate hikes among 30 and 15-year fixed as well as 1 and 5-year ARMS. Up until them middle of May, the Feds had been successful at keeping a lid on mortgage rates, leading to a spike in applications nationwide.
The rise in mortgage rates has predictably led to a drop in those new home and refinancing applications. Some economists and industry experts voiced optimism that the rise in home applicants was an initial sign of an economic recovery. Lower rates means more consumer spending power, savings on home purchases translates into spending elsewhere in the economy. Those hopes of a summer recovery are now fading as the Feds appear to be running out of options to control rates.
A rise in Treasury yields is the fuel behind the rising mortgage rates. The yield on the 10-year benchmark Treasury was higher than 3.5%, up from 3% three months ago. Rates on 30-year yields have been on the rise as well since the first quarter. Many economists agree that as the Federal Reserve continues to purchase debt from the federal government, stabilizing Treasury yields, and thus mortgage rates, will become more difficult in the months to come.
Mortgage rates for 30-year fixed loans finished this week at 5.29%. Last week the rate for that type of mortgage was at 4.91%. The last time rates were that high on that loan type was December. In March buyers were able to lock in their rate on a 30-year fixed at 4.22%.
15-year fixed mortgage rates jumped from 4.53% to 4.79% last week. While this is still down from a year ago at this time, when rates sat at 5.65%, real estate analysts are worried a new housing market bottom is in store. Rates had dropped since March but rebounded sharply in this first week of June.
Rates on 1 and 5-year adjustable mortgage rates followed suit. 5-year ARMS climbed from 4.82% during the last week of May to 4.85% this week. Rates on 1-year ARMS finished the first week of June at 4.81%, up from last week's rate of 4.69%.
The debate as to how much of an effect the housing market and available mortgage rates have on overall economic recovery is still out. Consumer spending power is increased, however, with less percentage of a family income going towards a home purchase. Mortgage rates or home prices must come down to continue the increase in new home and refinancing applications. When this drop will occur remains to be seen.
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