Mortgage Rates Edge Higher, More Increases Expected As Fed Board Convenes Next Week

After falling for six consecutive weeks, mortgage rates edged up slightly this week. In its weekly survey of the nation’s lenders, mortgage giant Freddie Mac said rates on standard 30-year fixed-rate mortgages rose to 6.12 percent, up from 6.10 percent a week ago.

Rates had fallen off since mid-December when the 30-year mortgage hit a high of 6.32 percent. The slight bump is thought to be the result of investors anticipating another rate hike from the Federal Resrve, according to the national survey released Thursday.

“The minuscule rise in mortgage rates this week most likely reflects market expectations that the Federal Reserve will once again raise rates next week,” said Freddie Mac economist Frank Nothaft.

The Detroit Free Press reports that the Fed is expected to boost a key interest rate for the 14th consecutive time when its board convenes in a meeting on Tuesday. Many economists believe the central bank’s ongoing credit-tightening campaign, designed to keep inflation under control, is finally drawing to an end, with perhaps just one more rate hike after next week.

If the Fed does halt its rate increases at the March 28 meeting, analysts believe 30-year mortgages will rise only gradually for the rest of the year, perhaps reaching 6.75 percent by December. This is still a historically low figure that should keep the demand for housing at a reasonably high level throughout the year.

Other mortgage rates rose this week as well.

• Rates on 15-year fixed-rate mortgages, a popular choice for people refinancing their loans, averaged 5.70 percent across the country, up from 5.67 percent last week.
• One-year adjustable-rate mortgages (ARMs) edged up to 5.20 percent, a slight increase over last week when they averaged 5.18 percent.
• Rates on five-year hybrid ARMs, however, remained steady at 5.75 percent.

The averages do not include add-on fees known as points. Both 30-year and 15-year mortgages carried a national average of 0.5 points last week, while the 1- and 5-year adjustable-rate loans averaged 0.6 points. Overall, rates are historically low but up significantly from a year ago. A year prior to this week, 30-year mortgages averaged 5.66 percent, 15-year mortgages stood at 5.14 percent, one-year ARMs were at 4.18 percent and five-year ARMs averaged 5.02 percent.

The decline in mortgage rates over the past six weeks may be cushioning a slowdown in sales predicted for this year by the major housing industry associations.

“The housing boom has definitely peaked,” said Anthony Chan, chief economist at JPMorgan Private Client Services. “The big question now is whether we’re going to have a hard landing or a soft landing as sales slow. I’m in the “soft landing” camp, because moderating mortgage rates are cushioning the decline.”

Indeed, the demand for mortgages is still high. Applications rose for the third straight week, reflecting increases in home purchases and loan refinancing, the Mortgage Bankers Association said. Applications increased 7.7 percent to the highest level since November 4.

So if you are considering applying for a Florida home loan, you have a pretty good idea of what you can expect this year as far as rates go. If you are concerned about a jump in rates, talk to a lender or use a mortgage calculator and see how much an increase to 6.75 percent will affect your payments. Also, see how expensive it is to buy points from various lenders, which could lower the rate — and your monthly PITI — by a decent amount.