Mortgage rates continued to rise this week – due in part to the Federal Reserve's announcement last week that it would start tapering its $85-billion-per-month bond-buying program come January.
According to Freddie Mac's Primary Mortgage Market Survey, the average rate for a 30-year fixed-rate mortgage was 4.48% for the week ending Dec. 26 – an increase of about 0.7% compared to the previous week, when the rate averaged 4.47%. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.35%.
The average rate for a 15-year fixed-rate mortgage averaged 3.52%, an increase of about 0.7% compared to the previous week, when it averaged 3.51%. A year ago at this time, the 15-year fixed-rate mortgage averaged 2.65%.
The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was 3%, an increase of about 0.4% compared to the previous week, when it averaged 2.96%. A year ago, the five-year ARM averaged 2.70%.
The average rate for a one-year Treasury-indexed ARM was 2.56%, down about 0.5% compared to the week prior, when it averaged 2.57%. At this time last year, the one-year ARM averaged 2.56%.
Frank Nothaft, vice president and chief economist for Freddie Mac, noted that existing-home sales dropped 4.3% in November to a seasonally adjusted annual rate of 4.9 million. Also, new-home sales fell 2.1% to a seasonally adjusted annual rate of 464,000.
This was the second week in a row that rates increased. For the week ending Dec. 20, the average rate for a 30-year fixed-rate mortgage with conforming loan balance ($417,000 or less) increased to 4.64%, compared to 4.62% the week prior, according to the Mortgage Bankers Association's (MBA) weekly Mortgage Applications Survey.
The average rate for a 30-year fixed-rate mortgage with jumbo loan balance (greater than $417,000) increased to 4.63%, up from 4.61% the week prior, according to the MBA.
Interestingly, a report from the Federal Housing Finance Agency (FHFA) shows that mortgage interest rates decreased about 0.10%, on average, in November compared to October.
According to the FHFA, the average interest rate on a conventional, 30-year, fixed-rate mortgage of $417,000 or less was 4.48% in November – a decrease of 10 basis points.
Nationwide, the average rate for the purchase of a previously occupied home was 4.21% in November. The rate on the composite of all mortgage loans was 4.22%, down 10 basis points from 4.32% in October.
The effective interest rate – which is calculated using initial fees and charges over the life of the mortgage – was 4.38% in November, down 11 basis points from 4.49% in October, according to the FHFA.
Mike Fratantoni, vice president of research and economics for the MBA, says the increase in rates has precipitated the biggest drop in application volume since November 2008. As a result, application volume is more than 10% below last year's pace, he says.
‘Notably, government purchase application volume is almost 25 percent below where it was at this time last year, with the larger drop compared to conventional purchase likely due to the increase in Federal Housing Administration premiums over the course of the year,’ he says.