The average 30-year-fixed mortgage rate continues to trend upwards, rising by five basis points to 3.14% for the week ending Oct. 28, according to Freddie Mac’s latest PMMS survey.
Rates have risen roughly 20 basis points over the past month, and market observers believe that rise will continue.
Sam Khater, Freddie Mac’s chief economist, said in a statement that the yield on the 10-year Treasury has been increasing “due to the decline in new COVID cases, increasing consumer optimism, as well as broadening inflation and persistent shortages.”
“Mortgage rates are also rising, but purchase demand remains firm, showing that latent purchase demand exists among consumers,” he added.
Last week, the average 30-year-fixed mortgage rate slightly came in at 3.09%, while a year ago today the 30-year fixed-rate mortgage averaged 2.81%.
Rates have remained historically low in the past year thanks to the Federal Reserve’s monthly purchases of $120 billion in U.S. Treasury bonds and mortgage-backed securities. The central bank has signaled that once the labor market corrects itself, they will taper off their purchases.
With the rise in mortgage rates, refinance activity has started to wane, with refis representing 62.2% of total applications, per a report from the Mortgage Bankers Association for the week ending Oct. 22, 2021.
The refi index dipped 2% from the week prior, sitting 26% lower than it was the same week last year.
“The increase in rates triggered the fifth straight decrease in refinance activity to the slowest weekly pace since January 2020. Higher rates continue to reduce borrowers’ incentive to refinance,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Meanwhile, purchase activity has continued to thrive, with the seasonally adjusted purchase index increasing 4% from one week earlier, the MBA found.
“Purchase applications picked up slightly, and the average loan size rose to its highest level in three weeks, as growth in the higher price segments continues to dominate purchase activity,” Kan said.