Mortgage Rates on Fixed Loans Keep Rising

March 5, 2018 — 1:22 PM EST

Mortgage rates on fixed loans continue to march higher after Federal Reserve Chairman Jerome Powell offered up optimistic commentary on the state of the economy in testimony to Congress last week.

As result of his bullish stance, for the week ending March 1, the interest rate on a 30-year fixed-rate mortgage increased 3 basis points to 4.43%, reported Freddie Mac. The rate was at 4.40% a week ago and 4.10% in the year-ago time frame. According to Freddie Mac, since the start of 2018, the 30-year fixed-rate mortgage interest has been on a "tear," increasing 48 basis points. The rate has increased for eight straight weeks.

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Powell's commentary is raising concerns that the economy may be getting overheated and that inflation could start to increase. This would result in the Fed potentially raising interest rates more than expected this year. While a strong economy is good news, it tends to drive mortgage rates higher given concerns about inflation.

"As we documented, historically when mortgage rates surge, housing swoons. But we think strength in the economy and pent-up housing demand should allow U.S. housing markets to post modest growth this year even with higher mortgage rates," Freddie Mac wrote on its website in announcing mortgage interest rates for the week ending March 1. "We really have to wait for housing markets to heat up in spring, but early indications are that housing demand remains robust to these rate increases. The MBA reported in their latest weekly applications survey that home purchase mortgage originations were up 3% from a year ago."

According to Freddie Mac, the interest rate on a 15-year fixed mortgage also increased for the week ending March 1 to 3.9%. It was at 3.85% a week ago and 3.32% a year ago. The five-year adjustable-rate mortgage interest rate declined to 3.62% after being at 3.65% a week ago. In the year-ago period, this rate was at 3.14%.

Despite the rise in mortgage rates, the number of consumers applying for loans increased last week, according to the Mortgage Bankers Association's Weekly Mortgage Application Survey. For the week ending Feb. 23, mortgage applications jumped 2.7% from the week earlier. The results include an adjustment for the President's Day holiday. On an unadjusted basis, applications declined 6% year over year. Meanwhile, the refinance index declined 1% from the week earlier, with the refinance share of mortgage activity decreasing to 41.8% of all applications. In the previous week, refinancing accounted for 44.4% of all applications.