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Mortgage Rate Now Highest in a Year

June 2, 2013
Mortgage Rate, Highest in Year

The nation's benchmark mortgage rate jumped this week to its highest level in a year, signaling slightly higher costs for homebuyers. But rates still remain low by historical standards.

Mortgage buyer Freddie Mac said Thursday that the average 30- year, fixed-rate home loan is going for 3.81 percent, up from 3.59 percent last week. That's still not far from the 3.31 percent rate reached in November, the lowest on records dating to 1971.

The average on the 15-year loan rose to 2.98 percent, up from 2.77 percent last week. The record low of 2.56 percent was reached in early May.

Despite the higher rates, Brad Colvard, a loan officer with First Mortgage Co. in Tulsa, said financial conditions remain favorable for customers.

"Interest rates are a little above the low of the last 12 months, but if you look at the last 10 years, they're still incredibly low," he said.

Colvard said the uptick hasn't affected mortgage volume, as new mortgage activity continues to increase at First Mortgage. Refinances are less common but still strong at the company.

Actual interest rates offered can vary from lender to lender.

Mortgage rates are rising because they tend to follow the yield on the 10-year Treasury note. The yield rose to 2.17 percent on Tuesday, its highest level in 13 months. It has since fallen slightly to 2.11 percent in early trading Thursday. Still, that's up from 1.63 percent at the start of the month.

Yields on the benchmark note are rising because investors are selling government bonds. That's largely because minutes of the Federal Reserve's last meeting showed several policymakers favored slowing the Fed's bond purchases, perhaps as early as this summer.

The Fed's $85-billion-a-month in Treasury and mortgage bond purchases have pushed down long-term interest rates. When it slows the bond purchases, interest rates are likely to tick up. That would decrease the value of bonds with lower yields.

Cheaper mortgages have helped boost home sales this year and strengthen the housing recovery.

Sales of previously occupied homes and newly built homes both rose in April. And a report Thursday showed that the number of Americans who signed contracts to buy homes in April reached a three- year high, suggesting completed sales will increase again in the coming months.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year mortgages edged up to 0.8 point from 0.7 point last week. The fee for 15-year loans was unchanged at 0.7.

The average rate on a one-year adjustable-rate mortgage slipped to 2.54 percent from 2.55 percent. The fee for one-year adjustable- rate loans rose to 0.5 point from 0.4.

The average rate on a five-year adjustable-rate mortgage increased to 2.66 percent from 2.63 percent. The fee held steady at 0.5.

World Staff Writer Robert Evatt contributed to this Associated Press story.

Originally published by Staff and Wire reports.

(c) 2013 Tulsa World. Provided by ProQuest LLC. All rights Reserved.

Source: Copyright Tulsa World 2013

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