Mortgage rates, which “spiked” last week following a Federal Reserve Bank announcement indicating the Fed will taper its bond purchase schedule as the economy begins to recover, have continued their upward trajectory.
Rates have “soared,” “spiked,” and “surged,” according to reports, which put the average 30-year fixed rate mortgage loan at 4.46% this week as tracked by Freddie Mac; up .53 percentage points and marking the highest weekly uptick in more than 25 years.
As recently as May, that average hovered around 3.3%, encouraging consumers to refinance their existing mortgages and seek new ones.
The rate increase has garnered market reactions, including response among reverse mortgage investors, which have slowed their market participation in light of the change. The overall impact remains to be seen, with projections indicating the economic recovery prompting higher rates could outweigh the housing market downsides.
“Higher mortgage rates may dampen some housing market activity but the effect will be muted by the high level of buyer affordability, and home sales should remain strong,” said Frank Nothaft, vice president and chief economist for Freddie Mac. “For instance, existing home sales in May rose to its strongest pace since November 2009 and new home sales were the most seen since July 2008. In addition, the 12-month growth in the S&P/Case-Shiller 20-city home price index for April of 12.1 percent was the largest since April 2006.”
Written by Elizabeth Ecker