The extreme jump in mortgage rates, driven mostly by speculation that the Federal Reserve intends to stop its QE3 policy, led several Federal Reserve governors and regional bank presidents to publicly point out that the markets are overreacting to a potential policy change. If the economy doesn't improve as expected, the quantitative-easing policy will continue and the Fed will continue to suppress short-term interest rates.
According to HSH.com, last week the overall average rate for a 30-year fixed-rate home loan spiked by 43 basis points (0.43 percent) to 4.62 percent, the highest rate since August 2011. Average rates for 15-year fixed-rate mortgage loans leapt up by 38 basis points (0.38 percent) to 3.73 percent. FHA-insured, 30-year fixed-rate home loan rates jumped by 49 basis points (0.49 percent) to an average rate of 4.30 percent. The average rate for a 5/1 Hybrid Adjustable Rate Mortgage (ARM) also jumped by 43 basis points (0.43 percent) to 3.34 percent. Compare mortgage rates for your area before refinancing or applying for a purchase loan.
While rising home prices and a higher volume of home sales are encouraging, recently reported figures for both are from April and May, before mortgage rates began to rise. Other economic indicators, such as new claims for unemployment and an unemployment rate of 7.6 percent, suggest that the economy continues to grow but at a sluggish pace.
Although mortgage rates spiked last week, by the end of the week rates declined a little. The mortgage experts at HSH.com anticipate that, in spite of the volatile markets, mortgage rates may decline by 12 to 15 basis points this week.
Our live database of current mortgage rates can help you find the best mortgage rates in your area.