Mortgage Rates Trend Lower After Rising to a 2-year High

After rising to a level not seen in last two years, mortgage rates have trended lower in last two weeks.  After crossing 4.5% on a 30 Year Fixed two weeks back, the rates have gone down for two consecutive weeks.

Freddie Mac reported last week that the rates calmed further after going down the week before. According to Freddie Mac weekly Primary Mortgage Market Survey:

• 30-year fixed-rate mortgage averaged 4.31 percent with an average 0.8 point for the week ending July 25, 2013, down from last week when it averaged 4.37 percent. Last year at this time, the 30-year FRM averaged 3.49 percent.
• 15-year fixed-rate mortgage this week averaged 3.39 percent with an average 0.8 point, down from last week when it averaged 3.41 percent. A year ago at this time, the 15-year FRM averaged 2.80 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.16 percent this week with an average 0.7 point, down from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 2.74 percent.

Fixed mortgage rates fell as Federal Reserve (Fed) Chairman Bernanke helped ease market concerns about the Fed reducing its bond purchases. During a question and answer session following a speech on July 10th, Chairman Bernanke indicated that a highly accommodative monetary policy is what’s needed in the U.S. economy.

Indications of a slowing in the economic recovery also placed downward pressure on mortgage rates. Consumer sentiment fell to a three month low in July while retail sales in June grew by only 0.4 percent, which was half of the market consensus forecast. In addition, housing starts fell in June to the slowest pace since August 2012.

Outlook for Mortgage Rates: Rates should remain stable for first few days of the week till employment news comes out on August 2, 2013. Employment news is usually a big mover for rates. If the report comes out better than expected, the rates will move higher and vice-versa.  Unless you have a big risk appetite, I will recommend locking your rates in the first 3 days of the week.