Positive Jobs Report Spurs Mortgage Rate Increases

Upbeat reports of economic improvement, housing recovery, and jobs creation have created some upward pressure on mortgage rates. Rates had been holding steady since the first of the year, but they’re starting to edge upward with recent economic news.

When major investors see improvement, they tend to lose some of their previous interest in Mortgage Backed Securities (MBS). The Federal Reserve is stepping in as the buyer of MBS at a current $40 billion per month pace. While the Fed is expected to continue its “quantitative easing” program for the time being, economists at Fannie Mae are predicting that rates on 30-year fixed rate mortgages could be headed above 4 percent this year.

Rates on 30-year fixed rate mortgages averaged 3.63 percent for the week ending March 14. This is up from 3.52 percent last week but down from 3.92 percent a year ago. Freddie Mac reports that mortgage rates hit a low in their records dating back to 1971 of 3.31 percent during the week ending November 21, 2012.

15-year fixed rate mortgages averaged 2.79 percent in the week ending March 14, up from 2.76 percent the week before, but down from 3.16 percent a year ago. The 15-year fixed rate also hit a record Freddie Mac low in Nov 2012 of 2.63 percent. Some other bullet points in various reports and surveys in the last few weeks include:

• The Mortgage Bankers Association reports that applications for purchase loans were down a seasonally adjusted 3% in the week ending March 8, but were up 9 percent from a year earlier.
• The recent rises in the stock market are in part attributed to investors leaving MBS and returning to equities.
• Fannie Mae economists predict that 30-year fixed mortgage rates will climb above 4% the final quarter of this year and average 4.4 percent through 2014.

The real estate investor can still look forward to opportunities for purchase of value homes that will cash flow as rental units at rates still hovering just over historic lows.