Mortgage rates persist in their steady climb

Mortgage rates continued their upward march this week, rising to their highest levels since July.

According to the latest data, released Thursday by Freddie Mac, the 30-year fixed-rate average rose to 3.05% with an average 0.6 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 3.02% a week ago and 3.36% a year ago. The 30-year fixed average has risen for four consecutive weeks, something it hasn't done since April 2019.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. Because of the criteria, these rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be higher. The price adjustment for refinance transactions that went into effect in December is adding to the cost. The adjustment, which applies to all Fannie Mae and Freddie Mac refinances, is 0.5% of the loan amount. That works out to $1,500 on a $300,000 loan.

The 15-year fixed-rate average increased to 2.38% with an average 0.6 point. It was 2.34% a week ago and 2.77% a year ago. The five-year adjustable rate average grew to 2.77% with an average 0.3 point. It was 2.73% a week ago and 3.01% a year ago.

"Mortgage rates trended higher on the week as the market continues to gauge the economy's path forward," said Zillow economist Matthew Speakman. "By now, it's well known that mortgage rates are much higher than they were to begin the year, as a combination of increased inflation expectations and growing signals that the economy is recovering have propelled rates upward."

Although the trend lately has been for mortgage rates to move higher, their path remains uncertain and could stall or even reverse along the way, Speakman says.

"February inflation data showed that despite the growing expectations, upward price pressures remain muted at least for now, and separately, an auction for 10-year U.S. Treasury bonds — which tend to dictate the path of mortgage rates — was met with firm demand," he said. "These two factors pushed Treasury yields downward and helped halt mortgage rates' recent upward momentum. So, while the longer-term path forward for mortgage rates is almost certainly upward, these recent developments may indicate that the frantic upward trend in rates could subside in favor of more modest changes."

Bankrate.com, which puts out a weekly mortgage rate trend index, found more than half of the experts it surveyed predicted rates would stay the same in the coming week.

"These are certainly volatile times in the bond market and it's difficult to wager what will happen today or in the next few days," said Elizabeth Rose, sales manager at AmCap Mortgage in Dallas. "Hopefully, bonds will trend sideways from here until the Fed meeting next week, now that the [consumer price index] data is behind us. Rates are on the trend higher and expect that trend to continue. Currently, mortgage bonds are smack in the middle of a trading range and, depending on how the wind blows, could drop to the lower support level, which would cause rates to move even higher. Or, if bonds possibly catch a bounce, could improve ever so slightly."

Meanwhile, mortgage applications fell last week. According to the latest data from the Mortgage Bankers Association (MBA), the market composite index — a measure of total loan application volume — decreased 1.3% from a week earlier. The purchase index grew 7% from the previous week, while the refinance index dropped 5%. The refinance share of mortgage activity accounted for 64.5% of applications.

"The housing market was very active the first week of March, setting the stage for what MBA expects to be a strong spring of home sales," said Bob Broeksmit, MBA president and CEO. "Purchase activity increased to the highest level in four weeks and was up 2.4% from a year ago. The fast rise in mortgage rates in recent weeks continues to cool demand for refinances. Mortgage lenders are reporting that interest is still high, but activity did decline on an annual basis for the first time in nearly two years."

In a survey conducted by Fannie Mae, lenders expect their profit margins to decline for the second consecutive quarter.

"Despite continued strong expectations for purchase mortgage demand moving forward, many lenders are signaling caution about their profitability and market competitiveness," Doug Duncan, Fannie Mae chief economist, said in a statement. "This quarter, the largest net percentage of lenders in the survey history are expecting a decrease in their profit margin outlook. Those who expected a lower profit margin cited competition from other lenders as the primary reason."

The MBA also released its mortgage credit availability index (MCAI) that showed credit availability was unchanged in February. The MCAI held steady at 124.6 last month. An increase in the MCAI indicates lending standards are loosening, while a decrease signals they are tightening.

"Credit availability [remained] close to its lowest level since 2014," Joel Kan, an MBA economist, said in a statement. "The housing market is in strong shape heading into the spring, with robust growth in purchase applications, home sales, and new residential construction. Government credit supply has increased in five of the past six months, albeit in small increments, but remains tight by historical standards. This adds another obstacle for many aspiring first-time buyers who are already navigating supply and affordability constraints."