Mortgage Rates Jump

Strong economic trends like an improved employment outlook and rising homebuilder sentiment helped to drive average mortgage rates up 12 basis points from a week ago, according to Freddie Mac.

“Despite this week’s uptick in mortgage rates, the housing market remains on the upswing with improvement in construction and home sales,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “While there has been a material weakness in manufacturing and consistent trade uncertainty, other economic trends like employment and homebuilder sentiment are encouraging.”

The 30-year fixed-rate mortgage averaged 3.69% for the week ending Oct. 17, up from last week when it averaged 3.57%. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.85%.

The 15-year fixed-rate mortgage averaged 3.15%, up from last week when it averaged 3.05%. A year ago at this time, the 15-year fixed-rate mortgage averaged 4.26%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.35% with an average 0.4 point, unchanged from last week. A year ago at this time, the five-year adjustable-rate mortgage averaged 4.1%.

Rates rise

Rather than the U.S. economy, mortgage rates this past week were most affected by the “positive, albeit tentative, developments in Brexit and the U.S.-China trade conflict,” which pushed them to their highest levels since the spring, Matthew Speakman, a Zillow economist, said when that company released its own rate tracker.

“Rates moved steadily higher on Thursday and Friday as markets anticipated the announcement of progress in U.S.-China trade discussions. Sure enough, the two nations did come to a tentative, partial agreement, which sent bond yields β€” and thus mortgage rates β€” upward, at least initially. A lack of details surrounding the agreement pulled rates back before optimism emerging from Brexit proceedings nudged them up again,” Speakman said.

But world events are still more likely to influence mortgage rates going forward than domestic economic news, he said.

“Geopolitics and trade-related uncertainty have generally been the strongest determinants for the substantial drop in mortgage rates this year, so any progress in those areas has the potential to push rates sharply upward. Indeed, after a brief hiatus, it appears that geopolitical developments are again affecting mortgage rate movements β€” even more than economic data releases are.

“Bond yields barely budged on Wednesday despite U.S. retail sales figures falling for the first time in seven months. It’s a pivotal moment in these two major geopolitical stories, so it’s likely that more volatility for mortgage rates is on the horizon,” said Speakman.

Posted on on 10/17/19.