The most recent jump in the average 30-year mortgage rate above 5% could stall refinancings, but if traditional cyclical expectations hold the economic optimism spurring the increase could bolster home-purchase volumes.
"We're expecting the refinancing wave could taper off pretty quickly as rates get into 5%. But for homebuying, if you have a stronger job market and more confidence in the economy, that will overcome the resistance from another quarter point on the mortgage rate," Calvin Schnure, director of economic analysis at Freddie Mac, told National Mortgage News.
"We've been expecting mortgage rates to rise above 5% in 2011, so that's not a surprise," Schnure said, although he noted that the move above that psychologically important rate was earlier in the year than expected.
Schnure called concerns about inflation "overstated." "We're not in a situation where we have above-trend GDP growth or an overheated economy so we're not worried about inflation pushing rates up," he said.
