Mortgages resist upbeat news, don't rise
Mortgage rates remained stable this week, ignoring some of the positive economic reports released recently.
30 year fixed rate mortgage – 3 month trend
- The benchmark 30-year fixed-rate mortgage was 4.28 percent, the same as last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.59 percent. Four weeks ago, it was 4.28 percent. The mortgages in this week's survey had an average total of 0.29 discount and origination points.
- The benchmark 15-year fixed-rate mortgage fell to 3.4 percent from 3.41 percent last week.
- The benchmark 5/1 adjustable-rate mortgage rose to 3.38 percent from 3.37 percent.
- The benchmark 30-year fixed-rate jumbo rose to 4.39 percent from 4.34 percent.
But the economy was performing well
The U.S. economy grew at a seasonally adjusted annual rate of 4 percent in the second quarter of the year, more than economists had expected. Normally, a stronger-than-expected gross domestic product report can cause rates to jump quickly. That wasn't necessarily the case this time, but the situation can change at any moment.
If investors get more signals that the economy is strengthening, rates might begin to climb, industry experts say.
"When jobs really start to come back -- full-time employment, not part-time -- we are going to see rates spike, and spike really fast," says Geno McEwen, team leader with North American Savings Bank in Kansas City, Missouri.
Keep an eye on the jobs report
The July monthly employment report is scheduled to be released Friday. Rates could rise if the report shows significant improvement in the labor market, McEwen says. But as with previous reports, the numbers may be misleading if most of the growth comes from part-time, low-wage employment, he explains.
Still, it's wise to lock your rate ahead of major economic reports like this, says Grant Moon, president of VA Loan Captain Inc., a loan referral company that specializes in mortgages for veterans.
"It makes sense for borrowers to act sooner rather than later," Moon says.
Rates are not going back to the record-low levels seen earlier last year, but they are still extremely attractive, he adds.
The 30-year fixed averaged 4.29 percent in July, the lowest average since June 2013, when the average was 4.24 percent, according to Bankrate's weekly surveys.
If you are ready to get a mortgage, it is wise to lock as soon as you are comfortable with the numbers. But if you are still shopping for a home, there's no need to panic. You probably have some time before rates shoot up, says Bob Moulton, president of Americana Mortgage Group Inc. in Manhasset, New York.
The Fed still cares about mortgage rates
The Fed knows that the housing and the mortgage industry aren't ready for higher mortgage rates yet, Moulton says.
"Industrywide, mortgage origination volume is down 60 percent," Moulton says. "There are a lot of cash buyers and little inventory even though rates are still around 4 percent."
The Fed sounded a bit more positive about the economy as it wrapped its two-day Federal Open Market Committee meeting on Wednesday. For some, that's a sign that the Fed may be preparing to raise interest rates in 2015. The Fed has kept the federal funds rate near zero for six years.
On Wednesday, the Fed announced it will reduce its bond-purchase program by another $10 billion to $25 billion per month. The program was created to stimulate the economy and keep rates low. At one point, the Fed was buying $85 billion per month in Treasury and mortgage bonds. The purchases are expected to come to an end in October.
There's no question that eventually the Fed will raise rates and that will cause mortgage rates to spike, analysts say. But borrowers will probably have until the end of the year to take advantage of lower rates, Moulton says.
"I really don't see anything that is going to drive rates up at this point," he says.