Some lenders began repricing their mortgage rates ever so slightly earlier today, ahead of the Federal Reserve’s announcement regarding short-term rates. The moves were small, but just enough to reverse a downward trend. Fixed loan rates moved slightly higher — the first move up in five days for 30-year mortgages and in 10 days for 15-year loans.
Meanwhile, the Fed left short-term rates unchanged, as was widely expected.
A NerdWallet survey of lenders early Wednesday revealed the average rates for the most popular loan terms:
Mortgage Rates: June 15, 2016
(Change from 6/14)
30-year fixed: 3.70% APR (+0.01)
15-year fixed: 3.06% APR (+0.01)
5/1 ARM: 3.33% APR (NC)
Despite such favorable interest rates, May new home purchase applications fell 6% from the previous month, according to the Mortgage Bankers Association.
“While mortgage applications for new homes have declined almost 17% on an unadjusted basis from their peak in March of this year, applications in May remain 8% above their level from the same time one year ago,” Lynn Fisher, MBA’s vice president of research and economics, said in a statement.
Meanwhile, the Federal Reserve Open Market Committee’s short-term interest rate announcement surprised few market watchers.
“In the wake of the May employment report on June 3 — and ongoing concerns about ongoing slack in the labor market — not many housing observers are fretting about an upward move in this FOMC go-round,” John McManus, editorial director of real estate media firm Hanley Wood, tells NerdWallet. “At any rate, any upward move, now or later in the year, will be a slow, gentle, measured lift-off. When the Fed does decide to move, another 25-basis-point increase will obviously have more impact on sentiment than pocketbooks.”
McManus says home builders are jittery about even the slightest upward pressure on homeowners’ monthly mortgage payments, especially as they strive to offer new neighborhoods with homes in lower price ranges.
“The much higher likelihood that the Fed will continue its ‘pause’ mode will allow broader economic and gradual household wage recovery to bolster demand among entry-level buyers, for whom both the credit box and the supply of for-sale inventory seem to be expanding,” McManus adds.
Lock or float your mortgage rate?
In addition to today’s Fed interest rate decision, next week the U.K. votes on whether or not to remain in the European Union — a decision that could upend global stock and bond markets and ultimately steer mortgage rates higher. Barring such an outcome, most forecasts look for little change in mortgage rates through the end of the year, though short-term volatility can be expected.
As always, any decision to lock a mortgage rate should be based on the borrowers’ risk tolerance and their short- and long-term goals.
NerdWallet daily mortgage rates are an average of the lowest published APR for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing a more accurate view of the costs a borrower might pay.