Mortgage rates rise along with several key economic indicators
Mortgage rates rose for the third straight week, according to both the Mortgage Bankers Association and Freddie Mac. Rising mortgage rates are accompanied by positive numbers from private sector job creation, existing home sales and consumer confidence. As mortgage rates rose after a prolonged period of historic lows, mortgage refinancing activity dropped off a cliff.
Mortgage rates still lower than last year
Fixed mortgage rates rose again this week as economic data showed the economy may turn out being stronger in the fourth quarter than the third. Freddie Mac reported that the rate on a 30-year fixed-rate mortgage averaged 4.46 percent as of Dec. 2, rising from 4.40 percent the week before. A year ago the fixed-rate mortgage averaged 4.71 percent. Rates for 15-year fixed-rate mortgages and adjustable-rate mortgages also rose from last week, but they remain considerably lower than they were at this time last year. Getting the average fixed-rate mortgage rate required a down payment of 8 percent of the mortgage amount charged as pre-paid interest.
Signs of economic recovery
The positive economic news driving mortgage rates higher includes employment, even though the jobless rate rose to 9.8 percent in the latest jobs report from the Labor Department. November private sector job creation was the highest in three years and has grown for 10 consecutive months. Markets interpret that as a positive outlook going forward. A report on pending existing home sales showed an 11 percent increase, even though prices still trend downward. The consumer confidence index also jumped to 54.1 percent in November, which showed with a surge in holiday spending.
Mortgage refinancing takes a hit
A side effect of rising mortgage rates is the apparent end to a mortgage refinancing window that homeowners took advantage of to the tune of nearly $1 trillion. Many people who may have thought they could benefit from record-low mortgage rates appear to be no longer interested in refinancing. The Mortgage Bankers Association reports that the volume of mortgage refinance applications dropped 21.6 in the last week.