|After declining for two consecutive weeks, mortgage rates surged again rising to their second highest level this year according to the latest weekly Primary Mortgage Market Survey by Freddie Mac. According to the survey, the 30-year fixed-rate mortgage increased eight basis points to 4.62 percent from 4.54 percent last week. At the same time last year the rate was 3.91 percent.
“The good news is that the impact on consumer budgets will be smaller than past rate hike cycles,” said Sam Khater, Chief Economist, Freddie Mac while commenting about the rising interest rate environment that continued during the week after the Fed announced a 25 basis points hike on Wednesday.
The Fed rate hike though is not the reason for the rise in mortgage rates according to Khater and that’s because “a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements. The adjustable-rate mortgage (ARM) share of outstanding loans is a lot smaller now, 8 percent versus 31 percent than during the Fed’s last round of tightening between 2004 and 2006,” Khater said.
According to Danielle Hale, Chief Economist for Realtor.com, “Today’s mortgage rate does not reflect yesterday’s Fed move because the majority was collected ahead of the meeting. But in anticipation of these events, rates already adjusted higher. Homebuyers who were able to take advantage of the uncertainty to lock lower mortgage rates in the last few weeks are likely to be satisfied with their decision.”
For those homebuyers who were unable to take the benefit of the lower mortgage rates in the last few weeks, Hale said there was another reason to remain optimistic. “In spite of ongoing record low inventories and fast-moving properties in the housing market, we know that 557,000 new listings hit the market in May, the highest number since summer 2015,” she said. “These new listings may be just the opportunities homebuyers need to find and close on a home.”
However, Khater cautioned that borrowing costs were inching higher in the current environment as inflation continued to firm. “Although wages are slowing growing stronger gains would certainly go a long way in helping consumers offset these increases in prices and rates.”
According to the survey, 15-year fixed-rate mortgage rose to 4.07 percent this week from 4.01 percent, while the five-year Treasury-indexed ARMs rose to 3.83 percent during the week, compared with 3.74 percent last week.