Mortgage rates have risen sharply this week, erasing weeks of declines and putting more pressure on Americans to act quickly to secure cheap financing.
The 30-year fixed-rate mortgage averaged 2.79% in the week ended January 14, an increase of 14 basis points from last week’s record, Freddie Mac FMCC,
reported Thursday. A year ago, the 30-year fixed rate mortgage averaged 3.65%.
The 15-year fixed-rate mortgage, in turn, increased by just seven basis points to an average of 2.23%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.12%, 37 basis points above the previous week.
“As Treasury yields have increased, he is pushing mortgage rates to go up,” said Sam Khater, chief economist at Freddie Mac, in the report.
Historically, mortgage rates have roughly followed the direction of long-term bond yields, including 10-year Treasury yield. During the pandemic, this relationship has weakened from time to time, largely due to capacity constraints in the mortgage industry.
Last week, the 10-year Treasury recorded its longest string of daily increases in yield since 2017. Yields have increased as investors expect President-elect Joe Biden and a Democratic-controlled Congress to pass additional stimuli amid the pandemic of COVID-19.
“The economy is still weak, but the next government with Congressional support seems likely to issue a considerable additional stimulus, which will help offset the virus-related revenue and cut spending,” said Danielle Hale, chief economist at Realtor .with . “Furthermore, vaccines and the recently approved stimulus continue to be launched, giving consumers and investors a reason to expect better things in this new year.”
But “a prolonged increase is far from inevitable,” warned Matthew Speakman, an economist at Zillow ZG,
Many have criticized the vaccine’s launch in the US so far for being too slow, and concerns remain over whether the government’s stockpile will be sufficient in the long run.
Any major hiccups in lawmakers’ efforts to accelerate the country’s recovery from the pandemic could cause rates to fall again.