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Nancy Celis' Real Estate Blog

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By NANCY CELIS | Agent in Covina, CA


Fixed mortgage rates took a major leap up this week amid news of a growing economy led in part by the recovering housing market.


According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) rate averaged 3.53 percent (0.7 point) for the final week of January, up from 3.42 percent last week.


The last time the 30-year fixed rate averaged above 3.5 percent was in September 2012.

The all-time record low for the 30-year fixed was 3.31 percent the week of November 21, 2012, according to Freddie Mac.


The 15-year fixed average also increased significantly, rising 10 basis points to 2.81 percent (0.7 point).


Meanwhile, adjustable rates experienced more modest increases. The 5-year adjustable-rate mortgage (ARM) averaged 2.70 percent (0.6 point) this week, up from 2.67 percent previously. The 1-year ARM averaged 2.59 percent (0.5 point), up from 2.57 percent.


While real gross domestic product (GDP) showed a decline in Q4 for the first time since the recession ended, Freddie Mac VP Frank Nothaft said the last week’s news showed housing acting as a contributor to growth rather than a drag.


“For instance, new home sales totaled 367,000 in 2012, the most in three years and reflected the first annual increase in seven years. Pending home sales in 2012 averaged its highest reading since 2006,” Nothaft said. “And the S&P/Case-Shiller 20-city composite house price index rose 5.5 percent over the 12-months ending in November 2012, the largest annual growth since August 2006. All of these factors helped residential fixed investment to add nearly 0.4 percentage points to real GDPgrowth in the fourth quarter alone,” he added.


Bankrate also reported the largest increase in fixed rates in its survey since last March.

According to the site, the benchmark 30-year fixed average rose to 3.77 percent this week, an increase from 3.66 percent last week. The 15-year fixed average rose as well, breaking the 3 percent barrier to settle at 3.03 percent. According to Bankrate, the last time the 15-year average sat above 3 percent was in September last year.


Meanwhile, the 5/1 ARM climbed to 2.78 percent, an increase of 7 basis points.

Bankrate’s survey of analysts showed split expectations, with 40 percent forecasting a rise in rates and 40 percent anticipating a fall.


Derek Egeberg, branch manager at Academy Mortgage in Yuma, Arizona, said the gradual upward trend in rates has only just begun, even if it isn’t immediately obvious.


“Just like grass growing in your backyard, you may not see it daily, but you certainly see the difference on the weekend just before you start to mow,” Egeberg said. “Rates will continue to ‘grow’ higher as the economy moves forward and the media begins to tell us how well the stock market and housing are progressing.”


Other analysts wrote this week’s increase off as a temporary blip.


“The economy isn’t doing as well as many investors seem to think. The [GDP] figures released Wednesday should serve as their first warning,” said Polyana da Costa, senior mortgage report for Bankrate.com. “Next could be the jobs report on Friday. I think after this week’s jump, rates might fall slightly next week.”

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