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Mortgage Rates Increase After Slight Decline

Published on Wednesday - August 07, 2013

Despite trending downward for two consecutive weeks, mortgage rates have recently begun to increase. The lull culminated in a 0.08 percent increase on the rates of 30-year fixed loans. According to Freddie Mac, the increase resulted in the average rate jumping to 4.39 percent this week. By comparison, this time last year, a 30-year fixed-rate loan was trending at 3.55 percent.

A simultaneous increase was seen in the average rate on 15-year fixed loans as well. While not as significant, 15-year fixed loans witnessed a 0.04 percent increase of their own. Previously at 3.39 percent, as of last week, they are now 3.43 percent. This time last year, similar loans were represented by a rate of 2.83 percent.

Rumors suggesting that the Federal Reserve would put an end to its large bond-purchasing program caused the rates on 30-year loans to hit a two-year high in early July. However, as the probability became less likely, concern began to ease and mortgage rates began to drop slightly. As a result, July saw rates fall to 4.31 percent. By comparison, the average rate on a 15-year fixed loan had previously achieved a historic low in early May, when it fell to 2.56 percent.

The recent increase in mortgage rates may be attributed to the announcement by the Federal Reserve to continue their stimulus policy. The program is to include $85 million worth of Treasury notes and mortgage-backed securities.

“Mortgage rates rose slightly leading up to the Federal Reserve’s monetary policy statement this week,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement. “The Fed indicated that the economy expanded at a modest pace, but the unemployment rate remains elevated.”

According to market analysts, mortgage rate increases are expected to level out. The latest Mortgage Rate Trend Index identified that 71 percent of investors polled believe rates will either go down or remain static over the next week. “Mortgage bond yields fell after the Fed’s monetary policy statement offered no timetable for reducing (quantitative easing) bond purchases,” says Holden Lewis, Bankrate.com assistant managing editor. “That’s the new normal, at least until the employment report comes out August 2.”

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