Mortgage rates soar as investors become less pessimistic
Mortgage rates increased by 8 basis points this week as investor pessimism over the economy and the continued spread of the coronavirus lifted slightly, according to Freddie Mac.
Still, the 30-year fixed rate mortgage remained below the 3% mark this week, the Freddie Mac Primary Mortgage Market Survey found, rising to an average of 2.96%, compared with 2.88% one week ago.
The markets were highly volatile last week. Optimal Blue, a product and pricing engine provider with its own daily rate tracker, showed the 30-year FRM bottoming out at 2.839% on Aug. 10. The following day it rose to 2.876% and by Aug. 11 it was at 2.906%.
The increase over the past few days was the fastest in recent months. It ended a six-week stretch in which rates declined slowly due to pessimism over the COVID-19 surge in much of the nation and uncertainty over additional economic relief from the federal government, said Matthew Speakman, an economist for Zillow, in a commentary released Wednesday night for its rate tracker.
"Stronger than expected inflation figures over the past couple days, along with some encouraging developments regarding a COVID-19 vaccine, fueled the increase, although doubts about the federal government's ability to agree on a new coronavirus relief bill appeared to hinder some of the upward motion," Speakman said. "Rates are still historically low, but the recent increases were a wakeup call for many market participants.
"Where rates go from here is difficult to predict, but if key economic data, such as Friday's retail sales figures, continue to impress, along with a deal in Washington, then more upward movement in rates could be on the way," he said.
For the same week last year, the 30-year FRM averaged 3.60%, Freddie Mac said.
"Homebuyer demand remains strong, especially for those in search of an entry-level home where the improvement in affordability via lower mortgage rates has a material impact," Sam Khater, Freddie Mac's chief economist, said in a press release. "Even with this week's uptick, very low rates are providing a significant boost to the housing market that continues to hold up well during this time of uncertainty."
Among the other products tracked by Freddie Mac, the 15-year FRM rose 2 bps from last week to an average of 2.46%; one year ago, this rate averaged 3.07%
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.90% with an average 0.4 point, unchanged from last week. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.35%.