Mortgage Interest Rates Continue to Climb
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UPDATED: Jul 11, 2013
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Mortgage interest rates increased steadily this week according to rate reports provided by loans.org. Despite last week’s calm pattern, this week, the rates continued their ascent.
The 30-year rate alone increased more than 0.2 percentage points. For the week ending July 11, 2013, the 30-year fixed-rate mortgage (FRM) averaged 4.42 percent, a significant raise from last week’s reported rates of 4.19 percent.
Due to the recent upswing in mortgage interest rates, borrowers last year received a better deal than current mortgage loan borrowers likely will.
If a borrower took out a $250,000 home loan at today’s average 30-year rate of 4.42 percent, his or her monthly payment would be $1,254.86. After 30 years, he or she would pay a total of $451,749.60.
According to Freddie Mac, at this time last year the 30-year FRM averaged 3.56 percent. Using this rate, if borrowers took an equivalent loan out a year ago, they would pay $1,131 a month, for a total cost of $407,160 after 30 years. The additional cost on a $250,000 home loan today versus an identical mortgage one year ago equates to $44,589.60.
The other two mortgage interest rates experienced similar growth this week. The 15-year fixed-rate mortgage averaged 3.42 percent. Last week, the average rate was lower at 3.26 percent.
The 5/1 adjustable-rate mortgage averaged 3.36 percent. This mortgage interest rate increased from 3.22 percent set last week.
Freddie Mac attributes the mortgage interest rate growth to multiple factors including a strong employment report. According to the United States Department of Labor, around 195,000 jobs were added during June, exceeding market forecasts.
Frank Nothaft, vice president and chief economist for Freddie Mac, said that the Federal Reserve Bank of New York’s (Fed) minutes from their monetary policy committee meeting could change previous predictions made about reducing bond purchases. He said that many Fed committee members need the economic outlook to improve further before it will be appropriate to reduce and then eliminate their monthly purchases.
Len Kiefer, deputy chief economist for Freddie Mac, told loans.org that the Fed discussion, or “Taper Talk” is still impacting the market.
“June’s strong employment report led to more market speculation that the Federal Reserve will reduce future bond purchases causing bond yields to rise and mortgage rates followed once again with the average 30-year fixed moving up,” he said.
The significant increase over the past month since the Fed’s announcement has cause mortgage interest rates to exceed short term projections, but not yearly projections.
“We have been expecting rates to rise gradually throughout the remainder of this year,” Kiefer said.