The average 30-year fixed-rate mortgage rose nine basis points from the week prior to 3.02%, according to data released Thursday by Freddie Mac‘s PMMS. This is the first time in 10 weeks mortgage rates have risen above 3%.
“As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, Freddie Mac’s chief economist. “For those homeowners who have not yet refinanced – and there remain many borrowers who could benefit from doing so – now is the time.”
Even with rising rates, mortgage applications gained 2.1% last week, according to data from the Mortgage Bankers Association. Refinances in particular increased for the second consecutive week, pushed higher by a 4% bump in conventional refinance applications. However, this a far cry from the volume generated in 2020, when rates were in the 2% range.
Black Knight’s most recent rate lock data revealed that excitement in the market has waned since February. Mortgage rates ticked up nearly a quarter of a percentage point throughout February, eventually peaking at 3.18% at the start of April. Since then, rates have fluctuated above or below 3% by roughly seven basis points.
Despite significant incentives to refinance since then, Scott Happ, president of Black Knight’s secondary marketing technologies, said refinance activity simply hasn’t rebounded as expected.
Increasing Lending and Servicing Capacity – Regardless of Mortgage Rates
The low-rate environment won’t last forever, and both lenders and servicers need to be able to keep their costs down while managing volume fluctuations once things start to normalize.
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“As interest rates declined from March through May, refinance incentive rose by 15%,” Happ said. “This brought the number of high-quality refi candidates in the market to over 14 million as of the end of May, but rate lock volume has failed to keep pace.”
The bond market’s interest rates jumped last week after Federal Reserve officials indicated rate hikes could arrive as early as 2023, a year before originally expected. However, the Fed has yet to mention when it would start scaling back its massive bond-buying program, one of the biggest reasons mortgage rates have been near record lows for close to a year.
