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Mortgage Rates Remain Calm After Recent Climb

Hand touching house in grass
Mortgage loan interest rates changed meagerly this week according to rate reports provided by loans.org. The individual rates behaved differently by increasing, decreasing and remaining stagnant.

Interest rates increased at a rapid rate for the past five weeks, but tapered down for this current sixth week. Despite the constant upwards trend, home loan rates as a whole only made minimal changes for the week ending June 13, 2013.

The 30-year fixed-rate mortgage (FRM) averaged 3.87 percent, the same as last week.

The 15-year FRM averaged 2.97 percent, a small decrease from last week’s rate of 2.99 percent.

The 5/1 adjustable-rate mortgage (ARM) interest rate averaged 2.53 percent, a slight increase from the 2.49 percent seen last week.

Despite the lackluster reports for this week, the overall monthly trends for mortgage loan interest rates have been significant. In the past six weeks, the rates have increased from near record lows to yearly record highs, and leaving significant impacts on the housing industry.

Reports published today by Experian show the overarching impact of the higher mortgage loan interest rates.

For the first fiscal quarter of 2013, new mortgage originations increased 16 percent from last year, rising from $407 billion to $471 billion. Experian reports that housing originations have improved over the past eight fiscal quarters, leading to a strengthening housing market.

Alan Ikemura, senior product manager of Experian Decision Analytics, attributes 70 to 75 percent of mortgage originations to refinances.

Contrary to the increasing price, he said the higher rates will help to further increase new mortgage loans.

“In the short term, rising interest rates could actually drive originations as people finally get off the fence for fear of even higher interest rates,” Ikemura said.

Len Kiefer, deputy chief economist at Freddie Mac, agrees that despite increased rates, many borrowers could still lower their monthly payments with a refinance. He said that while the recent increase has been large, it is “not historically unprecedented.”

During the past decade, Freddie Mac has experienced significant weekly increases, such as a 20 basis point jump. Kiefer said that putting this year’s yield in a historical context shows that the increase is significantly less than what occurred in 2009 and 2011.

“While the recent volatility in interest rates has been somewhat surprising, the upward trend is not surprising at all,” Kiefer said. “We have been predicting that mortgage rates would rise gradually over the year as the economic recovery gained steam.”

He said that positive news coverage and an increased consumer confidence will speed up the economic recovery, but at a moderate rate.

“Some of the recent volatility might continue, but the long term trend should be an increase in rates,” Kiefer said.