Mortgage rates increased by a modest amount this week as recent economic developments may lead the Federal Reserve to continue preventing rates to increase.
Bankrate.com reports that though there was a slight increase in mortgage rates the week leading up to April 1st, the volume of mortgage and refinance applications increased for the second week in a row. The Mortgage Bankers Association reported that by April 1st, mortgage applications rose by 4.6%; purchase applications by 6.0%; and refinance applications by 4.0%.
“We have been so busy,” said Jon Stearns, a senior mortgage banker with American Fidelity Mortgage. “I expect it to get busier with the warmer weather as we head into April.”
The benchmark 30-year fixed-rate mortgage rose 0.02% from 3.8% the previous week. The benchmark rate has decreased an astonishing amount since last year. The rate was at 4.54% one year ago and 3.93% one month ago. The April 1st rate was 0.32% lower than the yearly average.
Other benchmark rates, however, have gone up. The 15-year fixed-rate, for example, increased from 3.04% to 3.06% and the 30-year fixed-rate jumbo rate rose from 3.92% to 3.93%.
However, the low rates come with a caveat. The declining rates are the result of March’s disappointing economic reports. Defying expectations from a few months ago that the economy is on the rise, March saw decreases in construction spending, auto sales, manufacturing, and job growth. The Federal Reserve, which controls the benchmark interest rate that business and consumer loan rates are based on, is known to be cautious about raising interest rates during slow economic times, leading financial experts to believe that the Reserve will keep rates stable for the time being.
“The economy is not evolving the way we thought a month or two ago,” says Paul Edelstein, an analyst at IHS, a financial analyst firm. “The jobs report will be really important if it comes in weaker than expected. Then, a lot of bets are off and puts into question when, or even if, the Fed raises interest rates this year.”
Other financial experts and lenders are also concerned about the dim economic news, pondering over how it will affect interest rates and mortgage prices.
“This is very important for one reason,” said Joe Hendrix, Director of Marketing, Home Rate Mortgage. “Everyone is itching to report the economy has recovered, and while that would be outstanding news in its own right, it will mean that mortgage rates will in fact, go up. It’s a game of up a bit, down a bit right now, so if you want to buy a home or refinance, this is the last chance to do it before the next article says the economy has recovered.”