By Kevin Chiu
Mortgage rates jumped higher for the third straight week as home buyers became skittish about making purchase decisions amid international unrest and doubts about the U.S. economy, according to Freddie Mac. The jump in interest rates on the bench mark 30-year fixed rate loan moved ever closer to 5% at 4.86%, five basis points higher from a week ago.
The rate has been on a three week trend moving higher, jumping five basis points each week for the last three. Rates below 5% are still near the lowest on record, but may have to move much lower in order to entice more home buyers seeking mortgage financing back into the market.
The 15-year fixed rate mortgage also moved five basis points up from last week to 4.09%. The 5-year Treasury indexed hybrid adjustable rate mortgage averaged 3.70% this week from 3.62% last week. The jump higher in rates came as consumer confidence in the U.S. economy waned as the New York Stock Exchange and other financial markets sustain their rocky activity, gaining in value over the last two years until recently when the market took a downturn.
The jump in interest rates could make it harder for some home buyers to qualify for a mortgage, especially those first time buyers who are on the fence about making a decision to make a home purchase in the first place.
However, Freddie Mac chief economist Frank Nothaft remains optimistic about the economy. “Low rates have benefitted from relatively benign inflation reports,” said Nothaft. “”Inflation as measured by the 12-month growth in the core price index for consumer spending, a metric preferred by the Federal Reserve, is hovering near the lowest pace since 1960 when this data series began.”
Low inflation usually means that the Fed will keep their lending rate to banks low. The rate has been at or near zero for more than a year in efforts to stimulate lending and the national economy.
The sales of homes and other residential properties remain sluggish, however, even as the nation moves into spring, which is usually the start of the robust home buying season. Foreclosures and bank assisted short sales continue to lead sales volume with one out of every three transactions being paid for in cash.
The rate on the seldom used 1-year Treasury indexed ARM hit 3.26% for the week, also up five basis points from 3.21% a week ago.