Mortgage rates increase further over past week

Mortgage rates reached another seasonal high, as the 30-year fixed rate climbed further upward over the past week.

The average 30-year fixed rate mortgage came in at 3.09% for the seven-day period ending Oct. 21, one week after surging to 3.05%, its highest point since April. The data comes from Freddie Mac’s Primary Mortgage Market Survey. In the same week last year, the 30-year average stood at 2.8%.

“Mortgage rates continued to rise this week due to the trajectory of both the economy and the pandemic,” said Sam Khater, Freddie Mac’s chief economist.

The recent two-week trend marks a departure from the languid movement rates exhibited over the summer. In the five months between late April and the end of September, the 30-year rate rose above 3% only twice, dipping as low as 2.77% in August. The relatively stagnant pace persisted, seemingly unaffected by accelerated inflation or other data that would normally cause rates to move.

Stronger-than-expected retail figures for September, as well as labor and supply-chain concerns that could lead the Federal Reserve to take action helped drive the rate spike, according to researchers at Zillow Group. They, along with other experts, see the Fed as holding the keys to rate movements in the near term.

“Tapering of Federal Reserve bond purchases later this year is viewed as fairly certain, and now the focus is on when and how many times the Federal Reserve raises the Fed funds rate in 2022 and beyond,” Paul Thomas, Zillow’s vice president of capital markets, noted in a press statement.

Along with Fed announcements, Dale Baker, president of home lending at KeyBank, cited economic reports, like the recent retail sales figures or nonfarm payroll, to be among the primary drivers that will determine where rates would go and when.

“The market is going through a bit of a correction and trying to figure out what the new normal is, what the new baseline is,” Baker said in a recent interview with National Mortgage News. “The big headline reports are going to be the ones that move the market.”

Unlike earlier increases over the summer that retreated almost immediately, some of the contributing factors around current upward momentum, including decreasing COVID-19 cases, show signs higher rates may stick a little longer.

“I don't know that I'd get in front of the moving train right now. Rates seem to be moving up. If you were considering refinancing your home just to get a lower interest rate now, it's probably the time to do it,” he said.

But even with increasing rates and continued high prices, the supply of available homes is improving, and Khater still sees some potential for both lenders and home buyers in the final months of 2021.

“Despite these countervailing forces, we expect the housing market to remain strong as we head into the end of the year,” he said.

Along with the rise of the 30-year average, the 15-year fixed rate also jumped higher for the week, up three basis points to 2.33% from 2.3%. During the same week one year ago, the average rate stood at exactly the same level — 2.33%.

The average 5-year Treasury-indexed adjustable-rate edged downward, declining to 2.54%, one basis point lower than the previous week’s 2.55%, and below its average of 2.87% in the same seven-day period of 2020.