30-Year Home Loan Rates Rise, Tracking Uptick in Treasury Yield

Rates on 30-year home loans rose this week and were poised to go higher as investors demanded higher rates for long-term government debt, which is closely tied to mortgage rates.

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year, fixed-rate mortgages rose to 4.91 percent from an average of 4.82 percent a week earlier.

Rates have been below 5 percent for more than two months. If they rise higher, that will diminish the appeal for refinancing for many borrowers.

The yield on the Treasury's 10-year note -- a key benchmark for home mortgages and other kinds of loans -- reached its highest level since November earlier this week.

"I'm not calling off my forecast for a bottom in housing, but it does raise the risk," said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. He said he expects the housing market slide to end this year.

The worry is that rising bond yields could drive mortgage rates higher and also increase the cost of borrowing for businesses. That could short-circuit the nation's efforts to emerge from the recession and housing crisis.

The federal government is being forced to greatly expand Treasury debt sales to cover a deficit that is projected to soar this year. So far, all that new debt had been sold at low interest rates as investors have preferred the safety of Treasury securities in uncertain times.

Mortgage rates "followed long-term bond yields higher this week as financial markets try to discern the state of the economy," Frank Nothaft, Freddie Mac's chief economist, said in a statement.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year, fixed-rate mortgage rose to 4.53 percent this week from 4.5 percent, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages inched up to 4.82 percent, from 4.79 percent. Rates on one-year, adjustable-rate mortgages fell to 4.69 percent, from 4.82 percent.

Borrowers can lower their interest rate by buying points, which cost 1 percent of the mortgage amount. The nationwide fee averaged 0.7 points last week for 30-year and 15-year mortgages, and averaged 0.6 points for five-year and one-year, adjustable rate loans.

U.S. mortgage applications fell last week as demand for home-loan refinancing slumped. The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan dropped 14 percent in the week ended May 22. Purchase applications rose 1 percent, while requests to refinance fell 19 percent.