Mortgage rates rose modestly in the week preceding Aug. 20, according to the Bankrate regular report, with the average rate on the benchmark 30-year fixed-rate mortgage reaching its highest point since October of 2014.
Bankrate calculated the rate at 4.06%, a slightly more conservative figure than the 4.29% reported by Ellie Mae the day before.
The rise is probably linked to anticipation of the Federal Reserve raising interest rates for the first time since the global financial crisis. The continuing recovery of the housing market is likely also a factor. Residential construction is growing at a faster rate than expected; July construction reached levels not seen since 2007, when housing prices first started to decline with the burst of the housing bubble.
The National Association of Home Builders also reported in August that homebuilder confidence was at a nearly 10-year high.
“The housing market is a leading light of the economy and it looks like that will be the case for a while,” commented Joel Naroff, president and chief economist at Naroff Economic Advisors, in a Bankrate news release.
Still, there are several signs that the recovering housing market and the mortgage market are not quite in sync.
As Lorraine Woellert wrote for Forbes Aug 19, overall mortgage debt is falling even as home prices are rising. Part of that is that buyers are putting more money down on houses. That’s a good thing; the general rule is that monthly debt payments, including mortgage payments, shouldn’t exceed 36% of a household’s gross monthly income, and putting more money down is a way to achieve that goal.
But that’s not the only factor at play. Changes that were intended to correct the “anything goes” mortgage market that caused the housing bubble to burst have now swung in the other direction and made it difficult for people who should be qualified homebuyers to get approved.
“The upshot,” Woellert summarized, is that “mortgages are harder to get, even for the people who deserve them.”