Mortgage rates rose again – illustrating how the Federal Reserve's policies can have a somewhat limited effect on the mortgage market.
The 30-year fixed-rate loan averaged 3.78% during the week ending October 31, up three basis points from last week, Freddie Mac
reported Thursday. This is the first time since April that interest rates have risen for three consecutive weeks.
Despite the increase, the interest rate on the 30-year mortgage loan remains over a full percentage point lower than at the same time a year ago.
The fact that mortgage rates rose even though the Fed just announced its plans to cut interest rates yesterday is not a surprise. When the Federal Reserve adjusts interest rates, it affects short-term interest rates.
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However, mortgage rates are longer interest rates. They generally track the direction of the 10-year Treasury
TMUBMUSD10Y, -5.12% .
The 10-year government rate rose ahead of the Fed's decision, although it has moved lower since then.
Other factors also affect the prices that mortgage lenders offer to consumers. Overall, consumer spending has remained strong lately, a reflection of the healthy labor market.
"The purchasing activity continues to show strength, indicating obvious demand from the home buyer," Sam Khater, Freddie Mac's chief economist, said in the report. "However, the lack of housing supply remains an important barrier not only to the housing market, but to the overall economic upturn."