The latest mortgage information shows that interest rates were up slightly this past week. Still very affordable rates. They remain at near historic lows. Here’s what’s driving our rates as shared with us by Paul Soule, Senior Mortgage Advisor with PHH Home Loans in Ocean City, Maryland.
March 24, 2011
Inflation Concerns Hurts Bond Demand
Freddie Mac’s latest survey reports a slight increase in mortgage rates this week. Concerns about inflation and political unrest drove investors away from bonds, pushing prices down and rates higher.
This week, the 30-Year fixed-rate mortgage (FRM) edged up to an average 4.81 percent , compared to last week when it was at 4.76 percent. Last year at this time, the 30-year FRM averaged 4.99 percent.
The 15-year FRM this week averaged 4.04 percent, up from last week when it averaged 3.97 percent. A year ago at this time, the 15-year FRM averaged 4.34 percent.
The 5-year Treasury-indexed hybrid ARM also moved higher, averaging 3.62 percent this week, compared to last week when it averaged 3.57 percent. A year ago, the 5-year ARM stood at 4.14 percent.
Similarly, the 1-year Treasury-indexed ARM rose to an average 3.21 percent, up from last week when it averaged 3.17 percent. At this time last year, the 1-year ARM averaged 4.2 percent.
Frank Nothaft, chief economist for Freddie Mac, cited inflation as a leading cause for the increases, explaining, “Mortgage rates were up this week compared to last, but still remain at relatively low levels. The rate uptick was related to higher than anticipated inflation data for February and ongoing geopolitical concerns. The 12-month growth rate in the consumer price index rose 2.1 percent in February, compared to 1.6 percent in January; however, most of the increase was due to food and energy prices, which tend to be volatile. The core index rose 1.1 percent, slightly up from 1.0 percent in January. “
Nothaft also commented on the broader housing picture. He said, “The housing market recovery experienced a setback during the start of this year. Existing home sales fell 9.6 percent from January to February and were down 2.8 percent from February 2010. Sales of new homes declined for the second consecutive month in February to record lows dating back to 1963. Even new construction on one-family homes fell 11.8 percent in February to the third slowest pace since 1959.”
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