Mortgage rates rose sharply this week, erasing weeks of falls and putting more pressure on Americans to move in a hurry to get cheap financing.
The 30-year fixed-rate mortgage averaged 2.79% for the week ended Jan. 14, 14 basis points from last week’s record low, Freddie Mac FMCC.
reported Thursday. A year ago, the 30-year fixed-rate mortgage averaged 3.65%.
Meanwhile, the 15-year fixed-rate mortgage rose only seven basis points to an average of 2.23%. The Treasury-indexed five-year adjustable-rate hybrid mortgage averaged 3.12%, up 37 basis points from the previous week.
“As Treasury yields have risen, it’s pushing mortgage rates up,” said Sam Khater, chief economist at Freddie Mac.
Historically, mortgage rates roughly follow the direction of long-term bond yields, including 10-year Treasury yields. Throughout the pandemic, this relationship weakened from time to time, largely due to capacity constraints within the mortgage industry.
Over the past week, the ten-year Treasury recorded the longest streak of daily yield increases since 2017. Yields have risen as investors expect President-elect Joe Biden and a Democratic-controlled Congress to pass stimulus additional in the midst of the COVID-19 pandemic.
“Currently, the economy is still weak, but it appears that the incoming administration with the support of Congress will issue a considerable additional stimulus, which will help offset the ongoing revenue related to the virus and the disruption of spending,” he 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 come this new year.”
But a “prolonged upward rise is far from inevitable,” warned Matthew Speakman, an economist at Zillow ZG.
Many have so far criticized the introduction of vaccines in the United States for being too slow and there are still concerns about whether the government reserve will be sufficient in the long run.
Any major setback in lawmakers ’efforts to speed up the country’s recovery from the pandemic could bring rates down once again.