Mortgage rates rose sharply this week, erasing weeks of declines and putting more pressure on Americans to move quickly to include cheap financing.
The 30-year fixed-rate mortgage loan averaged 2.79% for the week ending January 14, with 14 basis points from the record low set last week, Freddie Mac FMCC,
Reported Thursday. A year ago, the mortgage loan with a 30-year fixed interest rate averaged 3.65%.
The mortgage loan with a 15-year fixed interest rate has meanwhile risen by only seven basis points to an average of 2.23%. The 5-year treasury-indexed hybrid adjustable rate mortgage loan averaged 3.12%, up 37 basis points from the previous week.
“As treasury yields rise, it puts pressure on the mortgage rate to move up,” Samdie Khader, Freddie Mac’s chief economist, said in the report.
Historically, mortgage lending rates have roughly followed the direction of long-term yields, including yields on the ten-year treasury. During the pandemic, the relationship deteriorated from time to time, mainly due to restrictions in the mortgage industry.
For the past ten years, the Treasury has had its longest increase in daily yields since 2017 for ten years. Yields have risen as investors expect President-elect Joe Biden and a democratically controlled Congress to provide additional stimulus amid the COVID-19 pandemic.
“The economy is still weak at the moment, but the incoming government with the support of Congress is likely to issue a significant additional stimulus, which will help offset the continuing virus-related income and spending disruption,” said Danielle Hale, chief economist at Realtor. com, said. “In addition, vaccines and the recently approved stimulus are still evolving, giving consumers and investors reason to expect brighter things to come in the new year.”
But a ‘sustained upward rise is far from inevitable,’ warned Matthew Speakman, an economist at Zillow ZG.
Many people have so far criticized the deployment of the vaccine in America because they are too slow, and there are still concerns about whether government supplies will be adequate in the long run.
Any major setback in the legislators’ efforts to expedite the country’s recovery from the pandemic could bring rates down again.