The average 30-year-fixed rate mortgage declined one basis point to 3.55%
The average 30-year-fixed rate mortgage declined one basis point from the week prior to 3.55% during the week ending Jan. 27, according to the latest Freddie Mac PMMS Mortgage Survey.
A year ago, the 30-year fixed-rate mortgage averaged 2.77%. Most economists believe rates will continue to climb in the weeks and months ahead.
“Following a month-long rise, mortgage rates effectively stayed flat this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “We do expect rates to continue to increase but at a more gradual pace.”
The rise in mortgage rates moved in concert with the 10-year Treasury yield, which reached 1.85% yesterday, compared to 1.83% on the previous Wednesday.
The expectation of higher mortgage rates is based on the fact that the Federal Reserve will raise interest rates. On Wednesday, the central bank said it will happen “soon,” though an exact timetable has not yet been disclosed.
“With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Federal Open Markets Committee said in a statement.
The FOMC decided to keep the target range for the federal funds rate at 0 to 0.25%, but will likely take action on rates in early March.
The PMMS report is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.
The 15-year-fixed-rate mortgage averaged 2.80% last week, up from 2.79% the week prior. A year ago at this time, it averaged 2.20%.
According to Khater, recent increases have yet to significantly impact purchase demand, as history demonstrates that potential homebuyers who are on the fence will often enter the market at the start of rate increase cycles.
“Therefore, a fair number of current homeowners could continue to benefit from refinancing to lower their mortgage payment.”
The Mortgage Bankers Association (MBA) showed on Tuesday that mortgage applications decreased 7.1% for the week ending Jan. 21. The decline was buoyed by a 12.6% decrease in the trade group’s seasonally adjusted refinance index. On the purchase front, the index fell by 1.8% from the previous week.
Economists expect rates to increase in 2022 but will still be close to record-low levels. The MBA forecasts that 30-year mortgage rates will reach 4% by the end of 2022.
Source: housingwire.com | By Flávia Furlan Nunes