Refinance rates climb a half of percent in the last two weeks

Mortgage refinance rates have climbed over a half of percent in the past two weeks and are up nearly one full percentage point from their low point of the year. The mortgage markets have seen a significant change in the secondary bond markets, resulting in significant pricing pressure, which is driving up long term mortgage rates. The average rate for a thirty year fixed rate loan was at or below five percent for most of March and April, similar thirty year fixed rate loans today will range between five point five and five point seven five percent. The dramatic jump with interest rates will be directly reflected in the mortgage bankers weekly productivity reports as their will certainly be a drop with applications as more home owners are priced out of the market.

Interest rates for mortgage loans are not set directly by banks or mortgage lenders, rather they move up and down based on the yields from mortgage backed loan securities or mortgage bonds. Mortgage bonds received an unprecedented endorsement from the Federal Reserve in December of 2008, which allowed for rates to drop to their historically low levels. Today, the market for mortgage bonds appears to be focusing on the future growth levels of other investments, such as equities and the potential of future inflation in the market as commodity prices increase (oil/energy). These are only two of the factors that are driving mortgage rates upward. The bond market has been under pressure from investors that have grown concerned that the U.S. debt levels are growing at a pace that will drive future inflation and could lead towards economic challenges in the future.

Refinance rates are not likely to move from the mid five range to eight percent any time soon. There are too many unknown variables with the current economy and too many stakeholders who need to help keep rates at attractive levels to help the housing market recover. Refinance rates are likely to range between five and six percent for the balance of 2009. The economy has shown signs of an improvement, but it will take many months for growth to occur. The job market continues to show signs of weakness, but the pace of decline is slowing. The national unemployment rate will likely reach 10-11% at some point in the next 90 days as the market rebalances, and this will be a factor with helping to keep rates from jumping up too quickly.