Mortgage rates rose sharply this week, wiping out weeks of declines and putting more pressure on Americans to move in a hurry to block cheap financing.
The fixed-rate 30-year mortgage rose 2.79% on average for the week ending Jan. 14, up 14 basis points from last week’s low, Freddie Mac FMCC,
reported on Thursday. A year ago, the 30-year fixed-rate mortgage averaged 3.65%.
Meanwhile, the 15-year fixed-rate mortgage rose just seven basis points to an average of 2.23%. The 5-year mortgage, indexed by the hybrid Treasury, with adjustable rate, increased on average by 3.12%, increasing by 37 basis points compared to the previous week.
“As Treasury yields have risen, it is putting pressure on mortgage rates to rise,” said Sam Khater, Freddie Mac’s chief economist.
Historically, mortgage rates have roughly followed the direction of long-term bond yields, including the 10-year Treasury yield. During the pandemic, that relationship weakened from time to time, largely due to capacity constraints in the mortgage industry.
In the past week, the 10-year Treasury has seen the longest series of daily yield increases since 2017. Yields have risen as investors expect President-elect Joe Biden and a Democratic-controlled Congress to pass additional stimulus amid the COVID-pandemic 19.
“Currently, the economy is still weak, but the administration that comes with the support of Congress seems to be issuing a considerable additional stimulus, which will help offset the ongoing revenue from the virus and cut spending,” said Danielle Hale, chief economist at Realtor .com. “In addition, vaccines and the recently approved stimulus continue to unfold, giving consumers and investors a reason to expect brighter things to happen in this new year.”
But “prolonged growth is far from inevitable,” warned Matthew Speakman, an economist at Zillow ZG.
Many have so far criticized the launch of the vaccine in the US because it is too slow and there are concerns that the government stock will be sufficient in the long run.
Any major hiccups in parliamentarians’ efforts to accelerate the country’s recovery from the pandemic could lead to lower rates again.