Don’t expect a sustained rise in mortgage interest rates, even after the third consecutive week of higher rates.
The average interest rate on the 30-year fixed-rate mortgage (FRM) was 3.62 percent for the week ending Aug. 16, with an average 0.6 point, up from last week’s 3.59 percent.
However, this week’s rate report did not have time to reflect continued mixed economic news from reports on industrial production, wages, and consumer prices, all published Aug. 15, a day before Freddie Mac’s report.
Factory output – manufacturing – the most important component of industrial production, has risen 15.5 percent since its recession-era low in June 2009 and was up in July 0.5 percent from June and up 5 percent from a year ago, according to the Federal Reserve.
Positive economic news generally puts upward pressure on rates.
From July 2011 to July 2012, the 0.2 percent increase in real average hourly earnings, combined with a 0.3 percent increase in the average workweek, resulted in only a 0.6 percent increase in real average weekly earnings over the period, the bureau reported.
During the same period, the Consumer Price Index increased only a tad more, 1.4 percent.
The mix in economic news is reflected in the mix in benchmark mortgage interest rates.
The average rate on the 15-year FRM was 2.88 percent, with an average 0.6 point, also up from last week, when it averaged 2.84 percent. A year ago at this time, the 15-year FRM was 4.15 percent.
“The latest economic indicators point toward low inflation but gradually stronger economic activity which placed further upward pressure on long-term Treasury yields and, in turn, fixed mortgage rates,” says Frank Nothaft, vice president and chief economist of Freddie Mac.
However, the shorter-term 5-year Treasury-indexed hybrid’s adjustable rate (ARM) was 2.76 percent this week, with an average 0.6 point, down from 2.77 percent last week. The 5-year ARM averaged 3.08 percent a year ago.
Finally, for the week ending Aug. 16, Freddie Mac reported the 1-year Treasury-indexed ARM averaged 2.69 percent, with an average 0.4 point, up from last week’s 2.65 percent, and down from 2.86 percent a year ago.