Mortgage rates are moving so fast and so dramatically that even reports from barely a week ago seem suddenly outdated.
The average rate on the 30-year fixed conforming loan moved to its highest level in two years last week, according to the Mortgage Bankers Association weekly survey. That had a direct effect on consumers shopping for mortgages. Applications to refinance fell 16 percent and applications to purchase a home dropped 3 percent week-to-week.
That comes one day after another report from Zillow, an online real estate company, showed mortgage rates moving off their highs, although not that far off.
“Last week mortgage rates retreated from a 23-month high as the Fed sought to reassure markets that the wind-down of the stimulus program would be gradual, and contingent upon strong improvement in economic fundamentals,” said Erin Lantz, director of Zillow Mortgage Marketplace.
“This coming week, market participants will be focused on Friday’s jobs report as an indicator of whether the economic recovery is strong enough to withstand an earlier-than-expected withdrawal of Fed stimulus.”
Mortgage rates are up about a full percentage point from where they were at the beginning of May. That translates into about a 15 percent jump in monthly payments for the average home buyer, or 15 percent less purchasing power, depending on how you look at it. That can certainly be make or break for some buyers, especially first-time home buyers who may have been stretching in the first place.
The very recent rate retreat gave back around 15 basis points, but buyers really can’t play these small moves, which are largely dependent on investors buying or selling Treasury bonds.
“Although 10-year Treasury yields have come down slightly in recent days, we do not expect the bulk of the increase in mortgage rates to be reversed,” said Paul Diggle of Capital Economics. “We’ve penciled in mortgage rates of 4.5 percent at year end, rising to 5 percent next year and 5.5 percent in 2015.”