Mortgage rates surge to a five-month high
Mortgage rates surged to a five-month high this week, tracking a jump in bond yields after President Obama and congressional Republicans agreed to a plan that, if approved, would extend tax cuts for two years.
The average rate for a 30-year fixed loan increased to 4.61 percent this week from 4.46 percent, the fourth consecutive weekly gain, Freddie Mac said.
The average rate on a 15-year fixed loan rose to 3.96 percent from 3.81 percent. Rates on five-year adjustable mortgages averaged 3.6 percent, up from 3.49 percent. Rates on one-year adjustable-rate loans edged up to 3.27 percent from 3.25 percent.
Rates are rebounding after falling for seven months. Investors are selling Treasury bonds in anticipation of an extension of tax cuts and unemployment benefits that could boost the economy next year. Investors are also dumping bonds because they think budget deficits will grow over the long term because of the deal. The sell-off is raising the yield on Treasury bonds, and mortgage rates tend to track those yields.
The surge could slow refinancings and further hamper the housing market.
But rising borrowing costs from record-low levels might spur some prospective home buyers to make purchases to lock in low rates, said Paul Dales, an economist at Capital Economics Ltd.
"Once people see this might actually be the bottom, they go for it," Dales said in a telephone interview from Toronto.
Mortgage applications for home purchases climbed 1.8 percent in the week ended Dec. 3, the third straight increase, the Mortgage Bankers Association said Wednesday. Total application volume dropped 0.9 percent as refinancing slumped, the group said.
Freddie Mac's rate averages do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for 30-year and 15-year mortgages in Freddie Mac's survey was 0.7 point. It was 0.6 point for five-year and one-year mortgages.
-From news services