Interest rates on the most popular mortgage loan products took divergent paths in the latest HSH.com Weekly Mortgage Rates Radar report for the week ended February 24, 2015, with rate levels on fixed loans increasing but adjustable-rate mortgages declining slightly.
The streamlined HSH.com report, which now covers only two types of mortgages – 30-year fixed-rate mortgages and 5/1 ARMs – stated that the average rate for the former product increased by seven basis points, moving from 3.83 percent to 3.90 percent. On the other hand, 5/1 Hybrid ARMs were down by three basis points from 3.16 percent to 3.13 percent on the weekly survey, which covers a wraparound week of Wednesday to Tuesday.
HSH.com vice president Keith Gumbinger believes that the recent spate of mortgage rate increases may be ending soon, while also discussing some of the factors that caused this week’s increase in fixed rates. “Mortgage rates have mostly been climbing over the past three weeks, but the rise appears to be in the process of ending for the moment,” said Gumbinger in a statement. “A slightly warmer global economic climate, a European Central Bank adding stimulus and a belief by investors that the Fed is committed to raising rates before long were all among the reasons for the mild lift in rates.”
The end of 2014 was an Indian summer of sorts for the broader housing market, as home price hikes slowed down considerably, interest rates consistently moved down, and most major housing metrics improved to close out the year. This trend continued in the first month of 2015, as global economic concerns and worries of deflation in the United States had foreign investors turning U.S. bonds into a safe haven.
As such, U.S. bond yields and mortgage rates went down in parallel through the last weeks of January. However, improved economic prospects in some markets, including the United States, have been among the many variables influencing rate increases this month.
Gumbinger added in his statement that one variable that may play a role in his predicted mortgage rate declines going forward was Federal Reserve Chair Janet L. Yellen’s recent Congressional testimony. “Ms. Yellen’s testimony before the Congress Tuesday was less “hawkish” than was expected,” he continued. “In her prepared remarks, she again mentioned that the Fed would be ‘patient’ before starting to raise short-term interest rates, meaning that it will be at least a couple of Fed meetings before any change occurs.”
Aside from giving a basic recap of Yellen’s prepared remarks made earlier in the week, Gumbinger also explained that Yellen’s quotes from the testimony deemphasized the importance of language when it comes to determining when the Fed will be increasing its benchmark interest rate. “This cheered markets, and yields and rates retreated somewhat,” he added. “As a result, at least a portion, perhaps all, of this week’s bump in mortgage rates will be erased in the coming days.” For the coming two months, HSH.com has a downside forecast of 3.80 percent for 30-year fixed mortgage rates, and an upside prediction of 4.25 percent for the same type mortgage.