Mortgage rates hold steady in February

2/14/2014 10:40:30 AM

According to a recent report by the Mortgage Bankers Association, the number of mortgage applications for a new home purchase has soared during the first two months of 2014. Cold weather dampened momentum in the housing market at the end of 2013, but new homes appear to be on the rise, a positive sign for 2014.

"While the big jump may appear to conflict with other data, such as MBA's purchase application index and NAR's existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes," said MBA's Chief Economist Mike Fratantoni. "It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December."

In January, new single-family home sale reached an annual rate of 543,000 units, a 35 percent increase from December's rate of 402,000. Mortgage applications for new home purchases also were up 27 percent in January compared to December.

Mortgage rates remain steady
The increase in new home sales and mortgage activity comes just after reports that mortgage rates have remained around low levels last seen in November. Freddie Mac recently revealed that mortgage rates for a 30-year fixed-rate mortgage average 4.28 percent during the week ending Feb. 13. While this is a slight increase from the previous week's average of 4.23 percent, interest is still well below rates seen late last year.

The average rate for a 15-year fixed-rate mortgage was unchanged during the week ending Feb. 13, staying at 3.33 percent. Interest rates for short-term mortgages averaged just 2.7 percent a year ago. The mortgage market saw little change after the Bureau of Labor Statistics released its January national employment report, which revealed that just 113,000 jobs had been added to the economy during the month. 

"Mortgage rates were little changed amid a week of light economic reports," said Frank Nothaft, chief economist with Freddie Mac. "Of the few releases, the economy added 113,000 jobs in January, which was below the market consensus forecast and followed a slight upward revision of 1,000 jobs in December. Meanwhile, the unemployment rate fell to 6.6 percent, which makes thirteen consecutive months without an increase."

Mortgage rates had seen a five-week decline leading up to mid-February as a result of weak economic reports. The Federal Reserve's stimulus spending has helped keep interest rates near record lows since 2012, but many economists anticipate the average rate for a 30-year fixed-rate mortgage to rise above 5 percent in 2014. However, rates appear to be holding steady for the time being, giving first-time home buyers a better chance to find a property heading into the housing market's seasonal selling. First-time home buyers are more likely to apply for a long-term mortgage for a new home purchase than other buyers.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.