mortgage
Mortgage rates jump for 2nd week in a row
Mortgage interest rates popped up again this week.
30 year fixed rate mortgage – 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 3.71 percent compared with 3.6 percent last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.34 discount and origination points. One year ago, that rate stood at 3.97 percent. Four weeks ago, it was 3.61 percent.
The 30-year fixed remains lower than this year's record high of 3.85 percent, reached March 13. Rates have risen for the second week in a row, after having fallen for seven consecutive weeks.
The benchmark 15-year fixed-rate mortgage rose to 2.92 percent this week, compared with 2.82 percent last week, and the benchmark 5/1 adjustable-rate mortgage rose to 2.68 percent from 2.64 percent.
Weekly national mortgage survey
Results of Bankrate.com's May 15, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
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It's the economy, borrowers
Borrowers can blame the strengthening U.S. economy for the rate rise, says Rob McAllister, a mortgage broker at West Seattle Mortgage in Seattle.
"As the economy improves, people pull money out of fixed-income products, like bonds, and put money back into equities," McAllister says. "The (Dow Jones industrial average) and (Standard & Poor's 500 index) are setting new all-time highs, and people are wanting to get in on that, so they're pulling money out of bonds. Interest rates work inversely to bond prices, so if the price goes down, the yield goes up, which means rates go up."
Still, the Federal Reserve's program of buying mortgage-backed securities continues to create more demand for bonds, keeping a lid on rates. When the program, known as quantitative easing, ends -- and no one knows when -- that huge chunk of demand will go away and rates will rise, McAllister says.
A stronger economy is good news, despite the rate rise, says Stephen LaDue, a senior loan officer at PrimeLending in Brookfield, Wis.
"We need to get away from the Fed providing support," he says. "Yes, rates will go up a little bit. Rates always went up and down, and up and down. That's what rates do."
A temporary drop in the stock market could trigger a dip in rates, LaDue adds.
"The performance of the stock market has been a little too robust," he suggests. "Any correction there would drive down interest rates in the short term."
Favorable homebuying conditions
Meanwhile, housing affordability remains near historic levels favorable to homebuyers, according to the National Association of Home Builders, which released its latest NAHB/Wells Fargo Housing Opportunity Index Tuesday.
According to the index, 73.7 percent of newly built and existing homes that were sold in the first quarter of this year were affordable to households that earned the U.S. median income of $64,400. In the fourth quarter of 2012, 74.9 percent of the homes sold were affordable to households that earned the national median income.
NAHB Chief Economist David Crowe said in a statement that the Ogden-Clearfield, Utah, area held on to its title as the nation's most affordable major housing market while the San Francisco-San Mateo-Redwood City, Calif., region retained its position as the least affordable major market.
Other good news for buyers is that lenders have eased up slightly in loan approvals, at least in some parts of the country. McAllister says borrowers who might be described as "B-plus" are being approved today, whereas loans recently were restricted to borrowers who met "A-plus-plus" parameters.
"Lenders are feeling a little better about the housing market," McAllister says, "so they are a little more willing to lend."
That might take some of the sting out of higher interest rates.