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Mortgage Rates Decline this Week: 30 Year Conventional Rates Averaging 3.94%

Average mortgage rates have been on a tear recently and after five weeks of gains, average mortgage rates have finally fallen. 30 year conventional mortgage rates which were at 3.35 percent in early May, rose above 4.00 percent two weeks ago and have since fallen back below 4.00 percent. Mortgage rates today on 30 year conventional loans are averaging 3.94 percent, down from last week's average rate of 4.03 percent.

Mortgage rates moved much higher and well above record lows because 10 year bond yields moved higher. 10 year yields were just above 1.50 percent in early May, hit a recent high of 2.25 percent and have since declined to 2.14 percent. The future direction of both Treasury yields and mortgage rates will hinge on the Federal Open Market Committee's two day meeting this week.

Mortgage Rates Decline This Week 30 Year Conventional Rates Averaging 394Right after the two day meeting the FOMC will release a statement about future policy direction. While most believe the Fed will keep the federal funds rate at near zero percent they may announce some changes to their asset purchases. Each month the Fed has been buying $40 billion a month in mortgage-backed securities and $45 billion a month in long term U.S. Treasuries to keep long term interest rates low.

The recent run-up in long term Treasury yields and mortgage interest rates is due to the markets believing the Fed will announce a slowing or ending to their purchases. Just the possibly of this happening has already sent rates higher. If the Fed does announce a slowing or end to their buying these assets, rates will shoot even higher.

We could see 10 year bond yields move to 2.50 to 2.75 percent in a matter of weeks or months. 30 year conforming mortgage rates would move to the 4.50 percent to 5.00 percent. The last time 30 year mortgage rates were above 5.00 percent was back in January 2010. A quick increase in mortgage rates would slow down the housing recovery and the economy.

Average 15 year conventional mortgage rates are currently at 3.07 percent, a decline from last week's average 15 year mortgage rate of 3.18 percent. 30 year jumbo mortgage rates are averaging 4.35 percent, an increase from the prior week's average jumbo rate of 4.29 percent. 15 year jumbo rates are averaging 4.35 percent, a decline from last week's average rate of 4.49 percent.
Author: Brian McKay
June 17th, 2013