Long-term mortgage rates gained considerably this week following the Department of Labor’s stronger-than-expected employment report, Freddie Mac and Bankrate.com reported today.
According to Freddie Mac, the 30-year fixed-rate mortgage rose to an average 6.11 percent from last week’s 5.96 percent, and the average 15-year fixed climbed to 5.78 percent from 5.65 percent. Points, or fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.
“November’s employment report showed stronger job growth, no change in the unemployment rate and a jump in wages, suggesting to some market participants that the probability of an upcoming recession might be lower than originally thought,” said Frank Nothaft, Freddie Mac vice president and chief economist. “This led to a rise in interest rates for U.S. Treasury securities this week and mortgage rates followed.
“However, against that backdrop, serious delinquencies (90 days or more delinquent or in foreclosure) on prime conventional mortgages rose to 1.31 percent in the third quarter of 2007 from 0.79 percent in the same quarter in 2006. And serious delinquencies for subprime loans rose to 11.38 percent from 6.78 percent over the same period, so the housing segment of the economy still has a way to go before bottoming out.”
Freddie Mac reported that average rates on adjustable-rate mortgages (ARMs) also rose this week, with the five-year Treasury-indexed hybrid ARM climbing from 5.75 percent to 5.89 percent and the one-year Treasury-indexed ARM growing from an average 5.46 percent to 5.5 percent. Points on the five-year and one-year loans averaged 0.6.
In Bankrate.com’s survey, fixed mortgage rates reversed course this week, with the average conforming 30-year fixed mortgage rate rebounding to 6.17 percent, and discount and origination points on the 30-year loans averaging 0.36.
The average 15-year fixed-rate mortgage popular for refinancing increased even more, to 5.89 percent, Bankrate.com reported, and the average jumbo 30-year fixed rate jumped to 7.24 percent. Adjustable mortgage rates were higher across the board, with the average one-year ARM rising to 6.17 percent and the average 5/1 ARM climbing to 6.29 percent.
According to Bankrate.com, mortgage rates erased the previous week’s decline after the November jobs report indicated that job growth is slowing, but not tanking. With bond yields priced for a worst-case employment report, the “not-as-bad-as-expected” report led Treasury yields and mortgage rates higher as traders unwound positions. Mortgage rates are closely related to yields on long-term government bonds. The uncertain path of the economy is bound to keep mortgage rates in flux, but rates have dropped notably since the summer. This attracts potential refinancers and prospective buyers that are eyeing both lower home prices and lower mortgage rates.
