Thirty-year fixed back to 4%; move away from Treasuries could hike rates further
U.S. rates for 30-year mortgages climbed, as optimism that Europe's debt crisis will be contained pushed up yields for the Treasuries that guide home loans.
The average rate for a 30-year fixed loan increased to 4 percent in the week ended today from 3.98 percent, Freddie Mac said in a statement. The average 15-year rate was unchanged at 3.3 percent, according to the McLean, Virginia-based mortgage- finance company.
Ten-year Treasury yields, a benchmark for mortgages, rose to a three-week high yesterday after the U.S. Federal Reserve and five other central banks agreed to provide lower-cost loans to struggling European banks. The Dow Jones Industrial Average gained 4.2 percent in its biggest rally since March 2009.
“As the European situation improves, presuming it continues to gradually improve, there will be a move away from U.S. Treasuries, and that will put upward pressure on mortgage rates,” George Mokrzan, director of economics at Huntington National Bank in Columbus, Ohio, said yesterday by telephone. “But it's up from extremely low levels. Even if it gets up to 5 percent, that's extremely low by historic standards.”
The 30-year rate has been at or below 4 percent for five straight weeks. It reached 3.94 percent in October, the lowest in Freddie Mac records dating to 1971.
Pending Home Sales
Low borrowing costs may be starting to lure buyers. Contracts to buy previously owned homes increased 10.4 percent in October from the previous month, the biggest gain since November 2010, according to a National Association of Realtors index released yesterday. Purchases of existing houses rose last month to a 4.97 million annual rate from September's 4.9 million pace, the Realtors said Nov. 21.
Tight lending standards, an unemployment rate at 9 percent and a looming supply of distressed properties are limiting demand and dragging down home values.
The S&P/Case-Shiller index of home values in 20 cities fell 3.6 percent in September from a year earlier, the group said Nov. 29.
A Mortgage Bankers Association index of home-loan applications fell 12 percent in the period ended Nov. 25 from the prior week, the Washington-based group said yesterday. The refinancing gauge dropped 15 percent to the lowest level since July, while the purchasing measure decreased 0.8 percent.
--Bloomberg News--
