Mortgage rates moved sharply higher this week, erasing weeks of falls and putting more pressure on Americans to move quickly to lock in cheap financing.
The 30-year fixed-rate mortgage averaged 2.79% for the week ending January 14, an increase of 14 basis points from the record low set last week, Freddie Mac FMCC,
reported Thursday. A year ago, the 30-year mortgage was averaging 3.65%.
Meanwhile, the 15-year fixed-rate mortgage rose just seven basis points to an average of 2.23%. The 5-year government bond-indexed hybrid mortgage loan averaged 3.1
“As government interest rates rise, it puts pressure on mortgage rates to move up,” said Sam Khater, Freddie Mac’s chief economist, in the report.
Historically, mortgage rates have roughly followed the direction of long-term bond yields, including the return on the 10-year Treasury. Throughout the pandemic, this relationship weakened from time to time, mainly due to capacity constraints in the mortgage industry.
Over the past week, the 10-year Treasury cut its longest series of daily returns since 2017. Yields have risen as investors expect President-elect Joe Biden and a Democratic-led Congress to provide further stimulus amid the COVID-19 pandemic .
“The economy is still weak at the moment, but the incoming administration with the support of Congress is likely to release a significant additional stimulus that will help offset the ongoing virus-related income and expenditure disruption,” said Danielle Hale, chief economist at Realtor.com. . “Additionally, the vaccines and the newly approved stimulus continue to spread, giving consumers and investors a reason to expect brighter things to come in this new year.”
But a “sustained upward rise is far from inevitable,” warned Matthew Speakman, an economist with Zillow ZG.
Many have so far criticized the US vaccine rollout for being too slow, and concerns remain as to whether the government’s inventory will be sufficient in the long run.
Any major hiccup in lawmakers’ efforts to speed up the country’s recovery from the pandemic could send rates lower again.