The average 30-year fixed-rate mortgage rose to 2.87% for the week ending in August 12, according to mortgage rates data released Thursday by Freddie Mac‘s PMMS.
The increase follows six consecutive weeks of mortgage rate declines. The week prior, mortgage rates slipped down to 2.77%, as the 10-year Treasury yields declined and fears over the Covid-19 Delta variant grew. This week, the 10-year Treasury rebounded slightly and mortgage rates followed suit.
According to Sam Khater, chief economist at Freddie Mac, the strong jobs report yielded higher rates.
“Following last Friday’s strong jobs report, which revealed broad based gains in employment and wage growth, mortgage rates are moving higher,” said Khater. “Despite the rise, rates remain very low, particularly given that economic growth is strong and will continue into next year.”
A year ago at this time, the 30-year fixed-rate mortgage averaged 2.96%. The 15-year fixed-rate mortgage rose five basis points from the week prior, at 2.15%.
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Mortgage rates, for most of 2021, have stayed below 3%, in large part driven by aggressive asset purchases by the Federal Reserve. The central bank has not indicated it will change its $120 billion in monthly purchases of U.S. Treasury bonds and mortgage backed securities until substantial further progress is made in the labor market.
Federal Reserve Chairman Jerome Powell said in July there is still “ground to cover” before it considers tapering its asset purchases.
Still, there has been some progress in the labor market. On August 6, the U.S. Labor Department announced 943,000 new jobs were added the month prior, beating expectations considerably. It marked the highest month-to-month job growth in nearly a year.
For the time being, mortgage rates are still low enough to entice homeowners to refinance, if they can. Uncertainty surrounding the economic impact of the Delta variant has also contributed to a desire to reduce monthly payments.
In July, the Federal Housing Finance Agency also eliminated a 50 basis point adverse market fee which had applied to most refinances. August is the first month lenders are no longer required to pay the fee.
In the past month, there are some signs that refinance activity is rebounding as mortgage rates have fallen. For the first time since February, refinance activity reached half of all mortgage originations, according to the latest report from Black Knight.
Borrowers responded strongly to low mortgage rates, according to Black Knight’s secondary marketing technologies president, Scott Happ.
“The mid-month surge was pronounced, but short-lived, suggesting that crossing the 3% threshold was what borrowers were waiting for before acting, and when rates ticked back above that psychological line, they held back on the sidelines once again,” said Happ. “Now that rates are again below 3%, a very early look at August lock data suggests more of the same in the month’s earliest days.”
Home prices have continued to rise precipitously, growing 16.6% annually in May, per the latest S&P CoreLogic Case-Shiller National Home Price Index report. A recent study of top 25 metros in the country with the highest median price increase over the last six months by HouseCanary found that Boise, Idaho saw the biggest growth.
But some determined homebuyers are still finding opportunities to buy.
Mortgage applications tracked by the Mortgage Bankers Association increased 2.8% for the week ending Aug. 6. And as 10-year Treasury yields rose on the positive July jobs report, mortgage rates tracked by the trade group followed suit, rising to 2.99%.
“Mortgage applications rebounded last week, including an increase in purchase applications for the first time in nearly a month,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Rates slightly rose but remained below 3%, driven by an end-of-week increase in the 10-year Treasury yield following the positive July jobs report.”
