Mortgage Rates Continuing to Go up Ahead of Fed’s Possible Rate Hike
The pursuit of the “American Dream” is becoming increasingly challenging. For many Americans wishing to buy their own homes, the dream is moving further away from potential reality, as the cost of financing continues to go up.
Government mortgage agency Freddie Mac has released the weekly data on mortgage rates, which shows that the average 30-year mortgage rates have just hit the highest level in six weeks.
The long-term 30-year rates are representative of the financing or refinancing cost that home buyers bear on their mortgage-backed home purchases.
According to Freddie Mac’s Primary Mortgage Market Survey (PMMS) for the week ending October 5, the average 30-year fixed mortgage rates have jumped to 3.85%, up from 3.83% a week ago. The current average is 43 basis points higher than the level seen in the same period a year ago, when the 30-year mortgage rates averaged out at 3.42%.
Likewise, 15-year mortgage rates are also climbing. For the week ending October 5, the 15-year fixed rate mortgages averaged a cost of borrowing of 3.15%, which is up from 3.13% a week ago. Again, this was 43 basis points higher than the level recorded in the same week in the previous year, when the average 15-year mortgage rate stood at 2.72%.
Five-year adjustable rates are similarly up 38 basis points from the same period a year ago, currently averaging 3.18%, up from 2.80% a year ago.
Meanwhile, we’ve been reporting the steady drop in mortgage applications as Americans hold back from financing and refinancing their home purchases at the high borrowing costs.
The rise in mortgage rates is lining up with the upcoming possible rate hike by the Federal Reserve. It is being widely speculated that the Fed will raise rates in its December meeting, citing improving economic conditions as a justification to resort to contractionary monetary policy.
The Federal Reserve has also indicated its plans to continue to raise rates through 2018, which only means that the cost of financing a mortgage-backed home purchase will continue to become more expensive for Americans in the coming months.
“Mortgage Rates Rise,” Freddie Mac, October 5, 2017.