WASHINGTON -- Mortgage rates rose in data released Thursday, with the 30-year fixed-rate average the highest it has been in nearly eight years.
According to Thursday data by Freddie Mac, the 30-year fixed-rate average interest rate jumped to 4.94 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) The rate was 4.83 percent a week ago and 3.90 percent a year ago. The 30-year fixed rate was last this high in February 2011.
The 15-year fixed-rate average climbed to 4.33 percent with an average 0.5 point. The rate was 4.23 percent a week ago and 3.24 percent a year ago. The five-year adjustable-rate average rose to 4.14 percent with an average 0.3 point. The rate was 4.04 percent a week ago and 3.22 percent a year ago. To calculate average mortgage rates, Freddie Mac -- the Federal Home Loan Mortgage Corp. -- surveys lenders across the country between Monday and Wednesday each week.
"The all-important read on the American labor market showed stronger than expected employment and wage growth, which gives the Federal Reserve yet another data point suggesting that the U.S. economy can withstand higher interest rates," said Aaron Terrazas, senior economist at Zillow. "The upward momentum for rates is likely to continue in the near term."
The Federal Reserve on Thursday left its key policy rate unchanged but signaled that it plans to keep responding to the strong U.S. economy with more interest rate increases. The next rate increase is expected in December.
The Fed kept its benchmark rate in a range of 2 percent to 2.25 percent. A statement it issued Thursday after its latest policy meeting portrayed the economy as robust, with healthy job growth, low unemployment, solid consumer spending and inflation near the Fed's 2 percent target.
Despite a U.S. trade war with key nations, weaker corporate investment and a sluggish housing market, the Fed is showing confidence in the economy's resilience. To help control inflation, it has projected three rate increases in 2019 after an expected fourth increase of the year next month.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that the experts it surveyed were almost evenly split on where the rates are headed. Half said they will continue to rise in the coming week. The other half expect them to remain relatively stable.
Greg McBride, chief financial analyst at Bankrate.com, predicts that rates will rise.
"No Fed rate hike this week but clear indications of another to come in December will push bond yields and mortgage rates a bit higher," McBride said.
Michael Becker, branch manager at Sierra Pacific Mortgage, said rates will hold steady.
"With a lack of economic news or reports to move markets, I expect bond yields and mortgage rates to remain flat in the coming week," Becker said.
With rates rising, mortgage applications continued to diminish, according to the latest data from the Mortgage Bankers Association. The market composite index -- a measure of total loan application volume -- declined 4 percent from a week earlier. The refinance index fell 3 percent from the previous week, while the purchase index dropped 1 percent.
The refinance share of mortgage activity accounted for 39.1 percent of all applications.
"The steady rise in mortgage rates ... continues to weigh on mortgage applications, as total volume fell last week to its lowest level since December 2014," said Bob Broeksmit, association president and CEO. "Although purchase applications declined for the second straight week, mortgage lenders throughout the country say homebuyer demand is still strong. With home price growth moderating, inventory conditions improving and incomes rising, the foundation is there for activity to pick up before the end of the year."
The association also released its mortgage credit availability index this week that showed credit availability increased in October. The index rose 2.5 percent to 186.7 last month. An increase indicates that lending standards are loosening, while a decrease signals that they are tightening.
"Credit availability increased in October, driven largely by an expansion in the supply of conventional credit, while government credit fell slightly over the month," Joel Kan, an Mortgage Bankers economist, said in a statement.
"Reversing a trend from last month, lenders made more conventional and low down-payment programs available to prospective borrowers. This increase in supply was likely in response to a growing number of first-time homebuyers in the market. ... Jumbo credit availability also expanded last month, with the jumbo index increasing again to its highest level since the survey began," he said.
The Fed's rate decision Thursday was approved 9-0 by its voting policymakers. Its brief statement was nearly identical to the one the Fed issued in September. It said the job market has continued to strengthen and noted that economic activity has been rising "at a strong rate."
In deciding how fast or slowly to keep raising rates, the Fed will be monitoring the pace of growth, the job market's strength and gauges of inflation for clues to how the economy may evolve in the coming months. The brisk pace of economic growth -- a 3.5 percent annual rate in the July-September quarter, after a 4.2 percent rate in the previous quarter -- has raised the risk that inflation will begin accelerating.
Last week, the government reported that the economy added a sizable 250,000 jobs in October and that average pay rose 3.1 percent over the previous 12 months -- the sharpest year-over-year gain in nearly a decade. That's welcome news for workers. But it's a trend that may raise concern that accelerating wages will help fuel undesirably high inflation.
Chairman Jerome Powell has stressed that the Fed is determined to follow a middle-of-the-road approach: Keep gradually nudging up rates to control inflation but avoid tightening too aggressively and perhaps triggering a recession.
Even after three increases this year, the Fed's benchmark rate is still low by historical standards. The central bank's policymakers have stressed, and most economists agree, that these small quarter-point increases amount to a gradual pace of credit tightening.
Still, the Fed's benchmark rate affects many consumer and business loans, including mortgages and credit cards, and when it rises, borrowing can become more expensive for many. Savers, though, typically earn more on their cash deposits as interest rates rise.
Information for this article was contributed by Kathy Orton of The Washington Post, and by Martin Crutsinger of The Associated Press.
A Section on 11/09/2018