Mortgage Rates Fall From 14-Month High as Increase LoomsPrashant Gopal
U.S. mortgage rates fell for the first time in seven weeks, a move down that’s likely to be temporary as the Federal Reserve considers scaling back its bond purchases amid signs of an improving economy.
The average rate for a 30-year fixed mortgage fell to 3.93 percent from 3.98 percent last week, McLean, Virginia-based Freddie Mac said in a statement. The average 15-year rate decreased to 3.04 percent from 3.1 percent.
Fed Chairman Ben S. Bernanke said yesterday that risks to the economy have decreased and policy makers could end bond purchases next year, sending yields for 10-year Treasuries, a benchmark for consumer debt, to a 15-month high. Mortgage rates for 30-year loans have jumped to the highest since April 2012 on speculation the stimulus may be reduced, increasing borrowing costs for homebuyers as competition for a tight inventory of properties pushes up prices.
“As interest rates begin to rise from their historic lows, some demand may also ebb from the market as home purchases become more expensive to finance,” Stan Humphries, chief economist for Zillow Inc., said in a statement today. “While we believe the housing recovery will remain strong, home value appreciation will slow down, and buyers in it for the short term could get burned if they assume home values will continue rising as they have unabated.”
Zillow, a Seattle-based real estate research company, reported that U.S. home values rose 5.4 percent in the 12 months through May. Sales of previously owned U.S. homes climbed more than forecast in May to the highest level since November 2009 and the median price jumped 15.4 percent from a year earlier to the highest in almost five years, the National Association of Realtors said today.
Bernanke yesterday suggested the housing market may be strong enough to withstand higher borrowing costs. Asked by a reporter whether rates exceeding 4 percent would derail the rebound, Bernanke said that “one important difference now is that people are more optimistic about housing” and surveys show they expect prices to climb further.
“And that, you know, compensates to some extent for a slightly higher mortgage rate,” he said.
This week’s rate doesn’t fully reflect the market’s reaction to Bernanke’s comments because the Freddie Mac weekly data is mostly collected from Monday to Wednesday.
While rising interest rates have had little impact on purchases, they appear to be slowing refinancing. The share of home-loan applicants seeking to refinance was 68.7 percent for the week through June 14, down from 76 percent in the beginning of May, when rates hovered near record lows, according to the Washington-based Mortgage Bankers Association.
The record rate for a 30-year loan is 3.31 percent, reached in November, according to Freddie Mac. The 15-year average fell to a record-low 2.56 percent last month.
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