WASHINGTON – Mortgage rates this week leaped to their highest levels in eight months as the Federal Reserve terminated the purchase of agency mortgage-backed securities it had engineered to keep rates low.
The average for the benchmark 30-year, fixed-rate loan jumped from 5.08% last week to 5.12% this week, its highest since last August; while the average for the 15-year, fixed-rate mortgage climbed to 4.52% from 4.39%.
Short-terms rates also moved sharply higher, with the average for the five-year ARM rising to 4.25% this week from 4.10%; and the average for the one-year ARM moving to 4.14% from 4.05%.
The 30-year, fixed rate had dropped to a record low of 4.71% in December, pushed down by a campaign by the Federal Reserve to reduce borrowing costs for consumers. The program ended last week, but the Fed left open the door to reviving the program if the economy weakens.
Mike Schenk, senior economist for CUNA, said the rising mortgage rates are a sign of growing confidence in the economy, and he pointed to a rising stock market. "Who knows at this point whether it’s a short-term thing? [But] we generally feel there is going to be upwards pressure on rates this year," he told Credit Union Journal.
The CUNA economist said he believes concerns of rising rates has spurred record sales of mortgages by credit unions, who sold more than 54% of the mortgages they originated last year, about twice as much as in past years. "The regulators have made it clear they’re concerned about interest rate profiles in these credit unions and they want credit unions to think twice about holding on to their mortgages," said Schenk. "They don’t want credit unions to be stuck when rates turn up."
