Current Mortgage Rates Jump Higher

The interest rate for a 30-year fixed-rate loan increased to 2.87% for the week ending August 12, according to Freddie Mac’s benchmark survey

Interest rates stopped their downward slide, rising 0.1 percentage points week-over-week. This is the highest the 30-year rate has been since July 15, when it averaged 2.88%.

“Following last Friday’s strong jobs report, which revealed broad-based gains in employment and wage growth, mortgage rates are moving higher,” said Sam Khater, chief economist at Freddie Mac. “After dropping for six consecutive weeks, the 30-year fixed-rate mortgage increased by ten basis points week-over-week. Despite the rise, rates remain very low, particularly given that economic growth is strong and will continue into next year.”

The direction of rates for various loan types was mixed this week:

  • The current rate for a 30-year fixed-rate mortgage is 2.87% with 0.7 points paid, up 0.10 percentage points over a week ago. A year ago, the 30-year rate was 2.96%
  • The current rate for a 15-year fixed-rate mortgage is 2.15% with 0.7 points paid, an increase of 0.05 percentage points from last week. A year ago, the 15-year rate was 2.46%.
  • The current rate on a 5-year adjustable-rate mortgage is 2.44% with 0.3 points paid, up 0.04 percentage points from last week. A year ago, the 5/1 ARM rate was 2.90%.

Mortgage Rate Trends

Mortgage Rate Trends Chart

Will current mortgage rates last?

Mortgage rates moved higher this week as the economy added close to a million jobs in July and new unemployment claims hit a new pandemic low.

There are also indications that the Federal Reserve may start to shift its accomodative monetary policy earlier than expected. On Wednesday Dallas Fed president Robert Kaplan said the central bank could consider a tapering of its monthly purchase of mortgage-backed securities and Treasury bonds beginning as early as this October, as long as economic conditions continue to improve over the next month and a half.

That could be the nudge that finally sends interest rates moving higher as experts have been forecasting. If rates do rise, however, don’t expect a sharp increase. Rates should stay close to historic lows for the foreseeable future.

On Thursday, the yield on the 10-year Treasury note opened at 1.345%, up from Wednesday’s close of 1.359%. However, yields were trending higher, edging close to 1.37% earlier this morning. There tends to be a spread of about 1.8 percentage points between the 10-year Treasury and average mortgage rates.

Are mortgage rates impacting home sales?

Low interest rates finally lured home buyers and owners back to the market last week. The total number of mortgage applications increased by nearly 3% for the week ending August 6, according to the Mortgage Bankers Association.

Purchase applications were up 2% week-over-week but were 18% lower than the same week last year. The increase was driven in large part because of a jump in the number of government-backed mortgages, particularly FHA loans.

“With low for-sale inventory keeping home-price appreciation in many markets at record highs, the jump in FHA purchase applications is potentially a sign that more first-time buyers are finding purchase options despite the high prices,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Homeowners also took advantage of low rates. The number of refinance loan applications increased by 3% from the previous week, although applications were 8% lower year-over-year. Refinance activity made up 68% of all loan activity.

“Homeowners continue to respond to lower rates, with refinance activity climbing to the highest level since February 2021,” said Kan.