With home prices on the rise, many prospective home buyers turn to mortgage rates for affordability. Freddie Mac's Primary Mortgage Market Survey for the week ending January 24 revealed average rates for fixed-rate mortgages increased from the week before but remain lower than those seen this same time a year ago.
According to the survey, the average rate for 30-year FRMs moved up to 3.42 percent from 3.38 percent recorded the week before. Freddie Mac identified this as the highest rate seen since the week ending September 29, but rates have been significantly lower than those seen a year ago, when the average was 3.98 percent. Likewise, the average rate for 15-year FRMs jumped to 2.71 percent, up from last week's average of 2.66 percent. This time last year the 15-year FRM averaged 3.25 percent.
While FRMs have been a popular option for those making the big investment and those refinancing, the average rate for 5-year ARMs remained at 2.67 percent, matching the average from the previous week. Despite not moving a significant amount so far in the new year, the average remains close to the 2.85 percent recorded from this time last year. The average rate for 1-year ARMs was 2.57 percent, the same from a week ago and quickly approaching the 1-year ARM rate of 2.74 percent recorded a year ago.
Economists expect affordability to boost housing market recovery
Even though average rates for ARMs have been consistent, a recent report from the Mortgage Bankers Association noted they accounted for just 4 percent of all applications for the week ending January 18. The chief economist of Freddie Mac Frank Nothaft said that slightly higher rates for FRMs shouldn't prevent Americans from making the investment, and affordability will contribute to the overall economic improvements in 2013.
"Fixed mortgage rates were up slightly over the holiday week but remain highly affordable and should continue to aid in the ongoing housing recovery," said Nothaft. "For instance, existing home sales totaled 4.65 million in 2012, showing a 9.2 percent increase over 2011 and the strongest pace in five years. In addition, the Federal Housing Finance Agency's purchase-only house price index rose 5.7 percent over the 12 months ending in November 2012, marking the largest annual increase since June 2006."