Mortgage rates increased for the first time in a month, according to Freddie Mac's most recent Primary Mortgage Market Survey. As the 10-year Treasury index continued its upward pattern seen over the past few weeks, the 30-year fixed-rate mortgage spiked 5 basis points.
Bankrate agreed, reporting increases in the 30- and 15-year fixed-rate mortgages, as well as the 5/1 adjustable-rate mortgage. The source noted this was the second week in a row that it found rates had increased.
During the week ending Thursday, Oct. 13, the 30-year fixed-rate mortgage averaged:
Meanwhile, the 15-year fixed-rate mortgage averaged:
At the same time, the 5/1 adjustable-rate mortgage averaged:
As always, there are a number of factors at play that could have caused residential mortgage rates to climb in the past week. Freddie Mac pointed out that signs of a healthy economy largely contribute to the upward change.
Many experts involved in the financial industry foresee a hike in the benchmark federal funds rate in the near future. A Wall Street Journal survey found that 81.4% of respondents believe the Federal Reserve will vote to increase rates during their Dec. 13-14 meeting, one year after their last increase.
When 2016 began, the Fed's plan was to make steady increases to the federal funds rate throughout the year. But certain circumstances made many investors nervous, including a weaker-than-anticipated jobs market and major changes overseas, such as the Brexit vote in June. These factors, among others, held the Fed back from following through on this plan.
Throughout the summer, employment improved, consumer confidence went up and the fallout from Brexit evened out. However, the most recent Federal Open Committee Meeting ended with a familiar vote: no change in rates. The next meeting will fall on Nov. 1-2, just days before the presidential election. As such, many believe a hike at this meeting is unlikely.
However, industry experts anticipate a hike will take place shortly after. CNBC reported that Boston Federal Reserve President Eric Rosengren, who is also a voting member of the Fed, noted inflation is close to the target rate of 2% and the unemployment rate is down, with the potential to improve even more over the next year.
"GDP growth looks like it's going to be strong enough in the second half of the year to ... [keep] the unemployment rate drifting down," Rosengren told CNBC.
"To me, [a December rate increase] seems quite appropriate," he continued.
With evidence that the economy is doing well and the increasing likelihood of a December rate increase, two-thirds of financial professionals who responded to Bankrate's Rate Trend Index indicated they believe mortgage rates could continue driving upward in the next week.
"Wages are rising, oil prices have gone above $50, and it's looking more and more like a December rate hike," explained Greg McBride, Bankrate.com's senior vice president and chief financial analyst. "All of this is pushing bond yields and mortgage rates higher, but there is a ceiling to it that we are very close to."
Predictions like these should be taken seriously by prospective homebuyers. As rates increase, the total cost of a home also goes up. Those who are considering a home purchase could save money by locking in a low rate sooner rather than later.
Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2015 CoreLogic Marketrac Report. Visit www.academymortgage.com to find a loan, get a rate, or calculate your payment today.