Mortgage rates recommence their upward trajectory

Washington

MORTGAGE rates resumed their ascent this week.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average inched up to 4.45 per cent with an average 0.5 point. (Points are fees paid to a lender equal to 1 per cent of the loan amount.) It was 4.44 per cent a week ago and 4.23 per cent a year ago.

The 15-year fixed-rate average ticked up to 3.91 per cent with an average 0.5 point. It was 3.90 per cent a week ago and 3.44 per cent a year ago. The five-year adjustable rate average edged up to 3.68 per cent with an average 0.4 point. It was 3.67 per cent a week ago and 3.24 per cent a year ago.

As expected, the Federal Reserve increased its benchmark rate on Wednesday, raising it to 1.75 per cent, the highest level in a decade. The central bank doesn't set mortgage rates, but its decisions influence them.

The hike came too late in the week to be factored into Freddie Mac's survey. The government-backed mortgage-backer aggregates current rates weekly from 125 lenders from across the country to come up with national average mortgage rates.

But the Fed's confidence in the US economy is driving bond yields higher. The yield on the 10-year Treasury hovered around 2.89 per cent the past two days. When yields go up, home loan rates tend to follow.

"In light of the Fed decision, buyers should start developing contingency plans for higher mortgage rates," said Danielle Hale, chief economist for Realtor.com. "Options are limited and hesitating to consider their financial options could mean losing out to other buyers. Days on market for homes were at an all-time February low of 83 days and are likely to move lower as we move into the heart of home-buying season."

Although rising rates could put a damper on the spring home-buying season, they can also spur buyers into action. Because buyers worry that the latest increase will be the first of many, they become more desperate to buy a home right away.

"So far, the US housing markets remain resilient in the face of higher mortgage rates," Len Kiefer, deputy chief economist at Freddie Mac, said in a statement. "The National Association of Realtors reported this week that existing home sales in February increased 3 per cent month over month on a seasonally adjusted basis and are up 1.1 per cent from a year ago."

Bankrate.com, which puts out a weekly mortgage rate trend index, found that a majority of experts it surveyed say rates will continue to rise in the coming week. Greg McBride, chief financial analyst at Bankrate.com, is one who predicts higher rates. "The Fed is confident about the economy and the expectations of faster growth, and an uptick in inflation will push bond yields and mortgage rates higher," Mr McBride said.

Meanwhile, mortgage applications were flat again last week, according to the latest data from the Mortgage Bankers Association. The market composite index - a measure of total loan application volume - decreased 1.1 per cent from a week earlier. The refinance index fell 5 per cent, while the purchase index ticked up 1 per cent. WP