Interest rates bounced up 0.10 and 0.11 percentage points last week for 30-year and 15-year fixed-rate mortgages, due to renewed concerns over inflation.
While this news is bad enough, it gets worse: If you have been waiting for lower rates to refinance, you may have missed your chance; rates may already be on their way up permanently.
"Mortgage rates drifted up this week over market concerns that the Federal Reserve Board may raise short-term rates later this year," explained Frank Nothaft, Freddie Mac vice president and chief economist. Nothaft went on to cite a recent Federal Reserve Bank of Minneapolis working paper that indicates the cumulative impact of the Fed's repeated rate cuts risks an increase in inflation.
The Fed funds futures market, which reveals public expectations about the amount and direction of future Federal Reserve rate changes, reveals high expectations for the current 2% federal funds rate to remain steady through the June and August meetings.
Many of the significant decreases in mortgage rates over the last year have come just before or just after major cuts in the federal funds rate. With no rate cuts on the horizon, mortgage rates may have nowhere to go but up.
The rate for 30-year fixed-rate mortgages was up to 6.08% with an average of 0.6 points paid at closing, according to the most recent weekly Freddie Mac Primary Mortgage Market Survey. That's up from the previous average of 5.98% with 0.5 points. The rate for 15-year fixed-rate mortgages was up to 5.66% with an average of 0.6 points, up from last week's average of 5.55% with 0.6 points.
Last week's rate represents a 14-week high for 15-year fixed-rate mortgages. Not since the week of Feb. 28, when it briefly touched 5.72% with 0.5 points, has the rate been this high. The new high point marks a relatively steady rise from its March low point of 5.27% with 0.6 points, just after the Fed made its last significant rate cut of 75 basis points.
With most indicators pointing to an end to the rate cuts, and some Federal Reserve Bank presidents becoming increasingly vocal about raising rates in the face of growing inflation, you may want to act now if you're thinking about refinancing.
If you have less than 20 years left on your current mortgage, consider refinancing with a 15-year fixed rate mortgage rather than a 30-year fixed rate loan. Matching the term length of your new loan with the remaining years of your old loan means you'll avoid paying the extra interest you would otherwise incur from extending your loan over a longer period.
If you're ready to take a look at some of the current offers on 15-year mortgages, take a look at the mortgage section on this site. Just enter your zip code and access up-to-date rates based on your preferred loan instrument.