A man walks into the Freddie Mac headquarters in McLean, Virginia, U.S., on Tuesday, March 18, 2014. Freddie Mac and Fannie Mae would continue paying all of their profits to the Treasury for the next five years under bipartisan Senate legislation designed to wind down the U.S.-owned mortgage financiers and overhaul the government's role in the housing market. Photographer: Andrew Harrer/Bloomberg (Andrew Harrer/Bloomberg)

The 30-year fixed-rate mortgage broke above the 4 percent barrier this week for the first time since July.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.04 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.99 percent a week ago and 4.09 percent a year ago. The 30-year fixed rate had remained below 4 percent for the past 26 weeks.

The 15-year fixed-rate average rose to 3.49 percent with an average 0.5 point. It was 3.44 percent a week ago and 3.34 percent a year ago. The five-year adjustable-rate average remained unchanged at 3.46 percent with an average 0.3 point. It was 3.21 percent a year ago.


Expectations that last month’s tax reform legislation will speed up growth and inflation have pushed long-term bond prices lower and yields higher. The yield on the 10-year Treasury jumped above 2.6 percent for the first time since March on Wednesday before closing at 2.57 percent. It has gone up 11 basis points since the start of the year.

Because mortgage rates tend to follow the same path as long-term bonds, home loan rates are also rising.

“Monetary policy decisions, incoming economic data and geopolitical news dominated headlines over the past few years, but markets are paying increasing attention to the fiscal outlook,” said Aaron Terrazas, senior economist at Zillow. “Absent spending cuts, the tax reform law enacted in December is likely to boost federal government borrowing, meaning that mortgage borrowers will increasingly be competing with Uncle Sam for long-term loans, pushing interest rates higher. If budget negotiations in Congress stall, there could be some volatility in lending markets, but any movements should be short-lived.”

Bankrate.com, which puts out a weekly mortgage rate trend index, found the experts it surveyed were divided on where rates are headed. Forty-seven percent say rates will remain relatively stable, 33 percent say they will rise and 20 percent say they will fall in the coming week. Shashank Shekhar, CEO of Arcus Lending, is one who expects rates to go up.

“I think higher mortgage rates will continue to be a longer-term trend as the combination of growth and global central bank bond tapering continues,” Shekhar said. “Both of these lower the yield on mortgage backed securities (MBS), thus increasing the mortgage rates that borrowers get.”

Meanwhile, mortgage applications were up this week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 4.1 percent from a week earlier. The refinance index grew 4 percent, while the purchase index climbed 3 percent.

The refinance share of mortgage activity accounted for 52.2 percent of all applications.

“Despite the increase in rates, applications increased both for purchase and refinance,” said Joel Kan, an MBA economist. “These increases were partly due to an upswing following the holiday season lull and potentially more borrowers trying to refinance before mortgage rates increase further.”

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