Mortgage rates climbed to the highest point since early April, putting more pressure on home buyers’ wallets.
The 30-year fixed-rate mortgage averaged 3.14% for the week ending Oct. 28, up five basis points from the previous week, Freddie Mac /zigman2/quotes/202741363/composite FMCC -0.27% reported Thursda y.
The 15-year fixed-rate mortgage, meanwhile, rose four basis points to an average of 2.37%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.56%, up two basis points from the previous week.
The rise in mortgage rates followed the direction of the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -9.87% , Freddie Mac chief economist Sam Khater said in the report, which has increased in light of declining COVID-19 cases and improving consumer confidence.
Other economists agreed that consumers’ improved outlook formed the recipe for rising mortgage rates.
“Consumer confidence is at the core of these economic gains, and as the number of COVID cases continues to drop, the outlook for the upcoming holiday retail season looks brighter, as long as U.S. ports can manage to offload a long line of cargo ships,” said George Ratiu, manager of economic research at Realtor.com. “And this positive economic outlook usually means higher mortgage rates for consumers.”
He added that next week’s meeting of the Federal Reserve’s Federal Open Market Committee could prove critical for the mortgage market, because the central bank could decide to announce a tapering of its asset purchases. Those purchases have included mortgage-backed securities, and without that liquidity lenders will likely boost rates even higher.
Expectations of rising mortgage rates are creating a “new equilibrium” for the housing market, Ratiu suggested.
“A good number of cities that were fraught with bidding wars earlier this year are finding a calmer housing landscape, where price reductions are bringing sky-high asking prices back down to earth,” he said. “While the market remains brisk, there are fewer competing offers, and contingencies have returned, both clear signs of a healthier housing market.”