Home Loan Interest Rates Continue to Ascend
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UPDATED: Jun 6, 2013
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Home loan interest rates continued their ascent this week according to rate reports provided by loans.org.
Last week they peaked at the highest level in over a year. This week’s average interest rates continue to grow for the fifth consecutive week.
For the week ending June 6, 2013, the 30-year fixed-rate mortgage (FRM) averaged 3.87 percent. Last week, the 30-year home loan interest rate averaged 3.79 percent.
The 15-year FRM averaged 2.99 percent. This rate made a small jump from last week’s average of 2.94 percent.
Finally, the 5/1 adjustable-rate mortgage (ARM) interest rate averaged 2.49 percent, an increase from 2.44 percent set last week.
There are rumors and concerns that the Federal Reserve may slow bond purchases because the economy is strengthening at a rapid rate. The Fed purchased up to $85 billion a month of Treasury bonds and mortgage-backed securities. This enables mortgage lenders to offer low interest rates on homes, sell the property and then regain the money quickly with profit.
Now that the housing market is improving, the Fed could significantly reduce their monthly bond and securities purchases. If this occurs, private investors will have to shoulder the initial added cost, which will then be later transferred over to consumers via a higher interest rate.
Freddie Mac said that the market concern caused upward pressure for home loan interest rates this week.
Neena Vlamis, president of A and N Mortgage Services said that interest rates are increasing because people are selling their bonds and investing in the stock market instead.
Beyond concerns about the Fed’s activities, other factors are helping the market recover. The National Association of Realtors (NAR) found that pending home sales rose in April 2013. That month experienced the fastest growth since exactly three years prior.
Lawrence Yun, NAR chief economist, said a pattern is developing where the housing market is continuing to gain with positive conditions. He predicts that total existing-home sales will rise just above 7 percent this year to five million.
Others, however, are seeing negative repercussions of increasing rates and home prices. Ryan Gable, broker and CEO of StartingPoint Realty, said the home loan interest rate spike, and limited supply in the surrounding Chicago area, impacted his local market.
“We had about 5 to 10 percent of our buyers, in the past week, exit the market and decide to wait,” he said.