Mortgage rates resurface after steep dive

Mortgage rates increased this week after a massive decline last week created refinance hysteria across the country.

30 year fixed rate mortgage – 3 month trend
  • The benchmark 30-year fixed-rate mortgage rose to 4.05 percent from 4.01 percent last week, according to the national survey of large lenders. One year ago, that rate was 4.27 percent. Four weeks ago, it was 4.3 percent. The mortgages in this week's survey had an average total of 0.27 discount and origination points.
  • The benchmark 15-year fixed-rate mortgage fell to 3.21 percent from 3.23 percent.
  • The benchmark 5/1 adjustable-rate mortgage rose to 3.14 percent from 3.09 percent.
  • The benchmark 30-year fixed-rate jumbo loan rose to 4.1 percent from 4.09 percent.

Weekly national mortgage survey

Results of's Oct. 22, 2014, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:
Change from last week:+0.04-0.02+0.05
Monthly payment:$792.50$1,156.20$708.17
Change from last week:+$3.81-$1.60+$4.49

A rapid decline

The previous week, the 30-year fixed fell to 4.01 percent from 4.18 percent. A week before that, the benchmark rate was 4.27 percent. Mortgage rates had been relatively steady before the plunge of more than a quarter of a percentage point in just a few days.

"You had your five-minute chance to refinance," says John Stearns, a senior mortgage banker with American Fidelity Mortgage in Milwaukee. "Since then, rates are up."

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The calm after the storm

This week's rise in mortgage rates comes after a dramatic dive last week, when the stock market got hammered and investors poured money into U.S. bonds. Mortgage rates tend to track the yield on the 10-year Treasury note.

"We got shaky data in the U.S. last week and that spooked the markets," says Paul Edelstein, director of U.S. financial economics at IHS Inc., noting the decline in September retail sales, government data that raised deflation concerns and the ongoing uncertainty over Europe's economic health.

Since then, the stock market has been doing better and rates have risen. The Dow Jones industrial average is up 1.5 percent so far this week after losing 1 percent last week.

"The reaction was probably a little overdone by the markets," Edelstein says. "Earnings have been good so far, so people are feeling better about the U.S."

Refi reboot

The decline in mortgage rates last week did spark a mini refi boom that is still prompting borrowers to call their banks or mortgage brokers.

"I hit capacity last week at 25 loans," says Scott Sheldon, a senior loan officer at Sonoma County Mortgages in California. "I got inundated within two days."

The volume of refinance applications jumped 23 percent after an 11 percent increase last week, according to a report from the Mortgage Bankers Association released Oct. 22. That marked the highest level since November 2013. Refinances also made up 65 percent of all mortgage applications, up from 59 percent the week before and the highest since December 2013. And, the average loan balance for a refi totaled $306,400, the most in the index's history.

Overall, mortgage volume was up 11.6 percent, factoring a 5 percent decrease in purchase applications.

Rates help housing

Still, consistently low mortgage rates helped boost the housing market last month. Sales of previously owned homes increased 2.4 percent in September to a seasonally adjusted 5.17 million units, the highest annual pace of the year. The median price rose to $209,700, up 5.6 percent from last year. A report on new home sales last month is due out Oct. 24.

"I have many preapproval letters outstanding, some for two or three months," says Stearns. "A short-term move in rates doesn't do much for the purchase market, though. By the time someone finds a house they want to buy, who knows where rates will be?"


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