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Mortgage Rates Bump Up In Anticipation of Fed Action

Mortgage interest rates, which have been hovering near record lows for the last two to three months, bumped up this week due to the increasing possibility of the Federal Reserve raising the federal funds target rate later in September.

Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) reported on Thursday that the both average 30-year fixed-rate mortgage (FRM) and 15-year FRM edged up by three basis points up to 3.46 percent and 2.77 percent, respectively, for the week ending September 1, 2016. Both rates were down significantly year-over-year—last year at this time, the average 30-year FRM was 3.89 percent and the average 15-year FRM was 3.09 percent.

Even with the increase, the current 30-year FRM rate is still only 15 basis points above the record low of 3.31 percent set in November 2012.

“The 10-year Treasury yield inched up in response to Fed Chair Janet Yellen's speech last Friday then settled near last week's average,” said Sean Becketti, Chief Economist with Freddie Mac. “The 30-year fixed-rate mortgage rose 3 basis points to 3.46 percent. Mortgage rates have hovered between 3.41 and 3.48 percent for the past ten weeks.”

Mortgage rates experienced s similar increase in HSH.com’s Weekly Mortgage Rates Radar, with the average 30-year FRM climbing by three basis points up to 3.54 percent.

“Mortgage rates moved a touch higher on a slightly increased possibility of a move by the Fed in September,” said Keith Gumbinger, vice president of HSH.com. “Last Friday's speech by Fed Chair Janet Yellen suggested that the Fed believes the economy is on a better path than earlier this year, and that it will soon be appropriate to raise short-term interest rates.”

Yellen’s speech on August 26 in Wyoming along with recent speeches from Fed Vice Chair Stanley Fischer and the presidents of several Federal Reserve Banks suggest that at least one rate hike is on the horizon before the end of 2016. On Friday, September 2, all eyes will be watching the BLS Employment Situation for August—a solid report, which would be the third one in a row, might prompt the Fed to raise short-term interest rates.

Gumbinger suggested that mortgage rates are going to remain at their current levels for the near term.

“While economic growth in the second quarter of 2016 was a weak 1.1 percent, all signs point to a pickup in the third,” Gumbinger said. “Incoming data seems to suggest that the 'Brexit' disruption has been minimal, and concern about that impact was a key factor in keeping the Fed from moving in June. With markets calm and the economy picking up, the case for a move by the Fed grows, and in turn, interest rates tick higher. However, in the current climate, they cannot go very far.”

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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