According to Freddie Mac, the 30-year mortgage rate hit a two year high in June, jumping 0.22 percentage points to 4.51 percent while the average rate for a 15-year mortgage rose 0.14 percentage points to 3.53 percent as mortgage rates in general continue to increase.
Frank Nothaft, vice president and chief economist of Freddie Mac said, â€œâ€Juneâ€™s strong employment led to more market speculation that the Federal Reserve will reduce future bond purchases causing bond yields to rise and mortgage rates followed. The economy gained 195,000 jobs in June, above the market consensus forecast, while revisions to the prior two months added 70,000 on top of that.â€
â€œMoreover, hourly wages rose by 2.2 percent over the last 12 months and represented the largest annual increase in nearly two years,â€ Nothaft added. â€œHowever, the minutes of the June 18th and 19th Federal Reserveâ€™s monetary policy committee meeting, released July 10th, stated that many members indicated further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of bond purchases.â€
Just two weeks ago, rates rose substantially, leading many to speculate that Federal Reserve Chairman Ben Bernanke would begin tapering off its purchases of bonds and mortgage-backed securities which keep borrowing costs down. Unemployment is at the center of the speculation, but CalculatedRisk Founder, Bill McBride asserts that the Fed will not taper in September if the August unemployment rate is 7.6 percent.
Dr. Jed Kolko, Chief Economist at Trulia reports that rising rates are currently the top consumer worry (41 percent), followed by rising prices (37 percent) and not being able to find a home they like (36 percent), with more than half of all consumers who plan to buy a home someday indicating that if rates reach 6.0 percent, they would be discouraged from buying.
Dr. Kolko notes, â€œHowever, asking-price and home-purchase mortgage applications through the end of June show little impact so far of rising rates. The main effect of rising rates has been a sharp drop in refinancing. Rising rates are unlikely to derail the housing recovery because: (1) The economy is strengthening at the same time as rates are rising. (2) Rising rates could lead to expanded credit availability. (3) Rates remain at historically low levels, making buying still much cheaper than renting at current prices, rents, and rates.â€
The rising rates have had a slight impact on the number of applications for new mortgages, but homeowners looking to refinance are pulling out, as the refinance share of total mortgage applications hovered around 80 percent for almost all of 2012, sliding downward quickly in 2013, now resting at just 64 percent.
According to Freddie Mac, for June:
by Tara Steele in Housing News - July 11, 2013 Â Â