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Repeated mortgage rate increases signify strengthening economy

Posted on Friday, May 31, 2013 at 11:59:01 AM

As the nation continues to make progress in its ongoing recovery, rising mortgage rates act as economic indicators of better times ahead - although they may temporarily deter prospective homeowners from obtaining residential financing.

Freddie Mac's Primary Mortgage Market Survey for the week ending May 30 outlined a jump in fixed-rate mortgage products, which reached their highest levels in a year. Average 30-year FRMs moved up from 3.59 percent to 3.81 percent last week, while 15-year FRMs appreciated from the preceding week's reading of 2.77 percent, to 2.98 percent.

"Fixed mortgage rates followed long-term government bond yields higher following a growing market sentiment that the Federal Reserve may lessen its accommodative policy stance," said Frank Nothaft, vice president and chief economist of Freddie Mac.

While the rates' current positions still offer consumers the opportunity to benefit considerably, many of those considering financing a property purchase with residential lending recently refrained from submitting home loan applications. 

The latest Weekly Mortgage Applications Survey released by the Mortgage Bankers Association showed an 8.8 percent decrease in its Market Composite Index for the week ending May 24. Though the Purchase Index increased 3 percent, the Refinance Index exhibited a drop of 12 percent.

As conditions are expected to continue trending upwards in the coming months, individuals looking to buy a house may want to act soon and lock in favorable rates.