Mortgage Rates Rising, But Still Remain Low
The average U.S. 30-year mortgage hit 3.91% last week. This is the highest percentage for a long term fixed mortgage since March of 2012 according to Freddie Mac, one of the nation's largest mortgage buyers.
The average 15-year loan is now above 3% for the first time since May of 2012, rising from 2.98% to 3.03% this week. Adjustable rate mortgage rates are also on the rise, with a one-year ARM loan average moving from 2.54% to 2.58%. The rate on a five-year ARM sits at 2.74%, up from 2.66%.
Even with the recent increases, the rates continue to be extremely low. The lowest rate historically for a 30-year loan was hit just last November at 3.31%. Rates for 15-year mortgages hit a record low of 2.56% in May of 2013.
The rate rise for mortgages has already begun to affect the still-recovering housing market, with a decrease in mortgage applications. According to the Mortgage Bankers Association, applications were down almost 12% in the final week of May. The number of applications is still much greater than before the housing recovery began last year, however, as rates are still low.
Both home sales and home prices have been on the rise in recent months, according to the Federal Reserve. Home prices have risen as much as 12.1% in the last year, a price increase that hasn't been seen since before the recession began.
The average mortgage interest rate increases are partially driven by rumors that the Federal Reserve plans to limit its bond purchases significantly. Mortgage interest rates have been kept low thanks to the Fed spending more than $85 billion a month on bonds. In addition, mortgage rates are based somewhat on the current rate of 10-year Treasury notes. These rates have risen from 1.63% in late May to a two-year high of 2.22% the last two weeks.