Interest Rates Inch Up
They say what goes up must come down. The reverse is true of mortgage rates. We’ve been enjoying historically low rates but it seems that they are on the rise.
Mortgage application filings fell 11.5 percent for the week ending May 31. The plummet is primarily a result of homeowners not being prepared for the drop in interest rates and a decrease in refinance activity.
The Mortgage Bankers Association reported this week that its refinance index fell 15 percent from the previous week. Previously accounting for 71 percent of mortgage applications filed, refinance activity has fallen to 68 percent of applications filed in just a week’s time.
The average contract interest rate for a 30-year, fixed-rate mortgage increased from 3.9 percent to 4.07 percent. Similarly, the 15-year fixed-rate mortgage rose from 3.1 percent to 3.23 percent and the adjustable-rate mortgage increased from 2.6 percent a week ago to 2.76 percent in the week ending May 31.
The increase in rates may have come as a surprise to homeowners looking to refinance but it was not unexpected and does not mean there aren’t still great opportunities if you are considering refinancing.
In February, we discussed the steepening yield curve that illustrated the uptick in rates that was expected. We explained how higher credit costs are not entirely unfavorable since they indicate rising demand for longer-term capital investments.
With that understanding and recent weeks of increasing construction activity and home values, it is no surprise that rates are increasing.
At the beginning of 2013, we stated consumers should explore the options available given the low rates while they are here. Now, the advice holds the same but with a stronger sense of urgency.
Rates have begun their upward trend and while change will be gradual in the market, home-buying season is underway and other factors – the lack of inventory, increased construction activity and increasing home prices – may inhibit opportunity as the industry swiftly progresses in its recovery.
– J.D. Crowe, Senior Vice President of Southeast Mortgage