Mortgage rates up, still below 2012 levels

After mortgage rates dipped to new record lows multiple times throughout 2012, many economists say they should gradually increase in 2013.

After mortgage rates dipped to new record lows multiple times throughout 2012, many economists say they should gradually increase in 2013. Data from Freddie Mac's Primary Mortgage Market Survey for the week ending January 10 supports this, as fixed-rate mortgage averages rose from the previous week.

The average rate for 30-year FRMs increased a significant amount, jumping to 3.4 percent from 3.34 percent recorded a week earlier. Despite the increase, the average is still lower than recorded this time a year ago, when it was 3.89 percent. First-time buyers and homeowners looking for lower monthly mortgage payments continue to make this a popular option, as adjustable-rate mortgages only accounted for 3 percent of all applications according to a report from the Mortgage Bankers Association for the week ending January 9.

In addition, the average rate for 15-year FRMs grew, reaching 2.66 percent, up from 2.64 percent from the previous week. The average rate from this time last year was 3.16 percent, indicating even weekly increased rates are providing affordability not seen before.

While FRM rates rose, adjustable-rate averages dipped. According to the survey, the average rate for 5-year ARMs slipped, after posting notable gains throughout the end of 2012. Freddie Mac reports the average was 2.67 percent, down from 2.71 percent recorded a week ago. Though the weekly decline extends affordability to those who don't mind a changing rate in exchange for paying off their home quicker, it is still closing in on levels recorded last year when the average was 2.82 percent.

Economic variables responsible for mortgage rate fluctuation
As economic reports for the final months of 2012 continue to roll in, housing market factors will begin altering accordingly. Vice president and chief economist of Freddie Mac, Frank Nothaft, noted that an increase in jobs that surpassed the market forecast in December will likely prompt more Americans to make the investment of buying a home. With the positive news on the job front, the unemployment rate fell to the lowest level seen since December 2008, of 7.8 percent. Nothaft stated 1.86 million jobs were created, the largest gain since 2006.

Increase positive news regarding both the stabilization of the overall economy and housing market should help boost consumer confidence in both areas. The unemployment rate fell below 7 percent in nearly 200 U.S. cities in November, the Labor Department noted - news that may lead to higher sales nationwide.

Additionally, a smaller inventory of delinquent properties on the market and higher sentiment should continue to close the gap on buyer demand and seller supply.

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