It begins. After months of low mortgage rates, it looks like the party is over.
Americans woke up this morning to the largest upward spike in 30-year fixed-rate mortgages since back in 2008. According to BankingMyWay, the 30-year rate rose roughly 140 basis points last week, from 5.143% to 5.28%.
Here is the whole enchilada, as measured by the BankingMyWay Weekly Mortgage Rate Tracker:
Description This Week Last Week
One-Year ARM 3.814% 4.74%
Three-Year ARM 4.347% 4.414%
Five-Year ARM 4.1% 4.195%
15-Year Mortgage 4.565% 4.487%
30-Year Mortgage 5.28% 5.143%
Here at BankingMyWay, we’ve been beating the drum over the Federal Reserve’s decision to opt out of the mortgage-backed securities market — probably to the point of driving readers crazy. But it really is a big deal, and it is the most prominent reason we’re seeing mortgage rates rise over the past week.
With the Federal Reserve’s $1.3 trillion “support system” unplugged — it officially ended last week with the $6.074 billion the Fed spent on mortgage securities — Uncle Sam’s till has been emptied and the mortgage-backed securities market is now back in the hands of private investors.
Once artificial stimuli are removed, lenders no longer can sit back and offer lower interest rates on mortgage security purchases. With demand low, rates can only go up (to attract more cash to the MBS market), and that’s largely what we saw last week.