Mortgage rates go back up

BY ADRIAN D. GARCIA/BANKRATE.COM

Several closely watched mortgage rates have been ticking up this week. The average rates on 30-year fixed and 15-year fixed mortgages both were higher. The average rate on 5/1 adjustable-rate mortgages, meanwhile, also cruised higher.

The average rate for a 30-year fixed mortgage is 3.83 percent, up 9 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 3.79 percent.

At the current average rate, you’ll pay a combined $467.67 per month in principal and interest for every $100,000 you borrow. That’s an extra $5.12 compared with last week.

The average 15-year fixed-mortgage rate is 3.26 percent, up 12 basis points from a week ago.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $703 per $100,000 borrowed. That’s obviously much higher than the monthly payment would be on a 30-year mortgage at that rate, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more rapidly.

The average rate on a 5/1 ARM is 4.17 percent, rising 30 basis points since the same time last week.

These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

Monthly payments on a 5/1 ARM at 4.17 percent would cost about $487 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Greg McBride, a senior vice president and chief financial analyst at Bankrate.com, is among the 44 percent of experts who believe rates will continue to rise. He said, “The economic glass is suddenly half-full, giving a boost to bond yields and mortgage rates.”

Jim Sahnger, a mortgage planner at C2 Financial Corporation, is one of the 11 percent seeing rates going back down. He said, “Unlike hard stops on holidays, elections and economic data dumps, meaningful progress on trade talks with China seem to be elusive. When traders believe we have progress, Wall Street drives up the stock markets and bonds deteriorate and interest rates rise. It seems that some of the talk that drove rates higher this week may have been overdone, but we shall see. Absent any surprises in economic data, I expect that rates should be slightly improved over the next week as questions remain over trade. Should a deal be struck though, all bets are off.”

Dick Lepre, a senior loan officer with RPM Mortgage, is among the 44 percent seeing rates staying the same. He said, “The techs (which I have been ignoring of late) are oversold and, in normal times, would portend a bullish coming week: higher bond prices, lower Treasury yields and mortgage rates. However, fixed income securities have not made a lot of sense lately. It is worth nothing that the long-term, 12- to 15-month bull cycle for Treasuries looks as if it’s about to end. If that’s the case, we’re looking at 12 to 15 months of higher rates.

The only thing which will prevent higher rates is the Fed admitting that it intends another quantitative easing (QE) and follows through.”

Logan Mohtashami, a senior loan officer at the AMC Lending Group, agrees, adding, “Last week, the 10-year yield was at 1.81 percent, and right now, it’s at 1.82 percent. As always, bad China headlines and weaker PMI data drove yields lower last week, briefly, and then we shot right back in yields. This range we have been in between 1.43 percent to 1.94 percent on the 10-year yield has been challenging to crack because we don’t have recessionary data lines, and we aren’t showing too much increase in the rate of growth either. However, yields are trying to press above that 1.94 percent level. Keep an eye out on domestic and global PMI data and any headlines from China and the phase one signing of the trade deal.”

Elizabeth Rose, a certified mortgage planning specialist at AmCap Home Loans, said, “Rates will be unchanged. Mortgage bonds have been in a battle the last few days and the pressure continues as stocks rally. Although it isn’t a “done deal,” the U.S. – China trade deal signals a potential boost for growth around the globe. This would be a headwind for mortgage bonds along with increased inflation expectations in the markets. The current situation has mortgage bonds wedged tightly between the 100-day and 200-day moving average. The downside risk is awful (to the tune of 100 basis points) to the next technical support level. Any upside potential (improvement opportunity) is small, so I highly recommend locking in your interest rate.”