US 30-year mortgage rate surpasses 3% for first time since July as Treasury yields rise

  • The 30-year average fixed mortgage rate fell from 2.97% to 3.02% this week, Freddie Mac said Thursday.
  • The reading marks the first time the rate has climbed above 3% since July. Rates have now remained stable or have increased for five consecutive weeks.
  • Mortgage rates typically move in tandem with the 10-year Treasury yield, and optimism about the US recovery has recently led investors to shed government bonds and skyrocket yields.
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After hitting more than 15 record lows since the start of the pandemic, the benchmark mortgage rate is finally rebounding.

The 30-year average fixed mortgage rate fell from 2.97% to 3.02% this week, mortgage finance giant Freddie Mac said Thursday. The reading marks the first time the rate has landed above 3% since July. The rate has now risen or held steady for five straight weeks, signaling that the low borrowing costs that fueled the housing market boom are reversing.

The 15-year fixed mortgage rate averaged 2.34%, remaining stable from last week’s reading. The hybrid variable rate indexed to the 5-year Treasury averaged 2.73%, compared to 2.99%.

Mortgage rates began to fall in the spring of 2020 when the pandemic first hit the U.S. economy. The Federal Reserve’s decision to cut interest rates to zero lowered borrowing costs, and follow-up guidelines hinting at years of ultra-relaxed monetary conditions pushed mortgage rates down.

The downtrend has helped distinguish the housing market from the rest of the economy. Home buying activity increased as Americans took advantage of low rates and new work-from-home mandates. Supply immediately struggled to keep up with historic demand, causing home prices to rise steadily.

This buying frenzy may soon subside as mortgages become more expensive, according to Freddie Mac.

“Although buying activity remains high, it has cooled in recent weeks and is currently at the level of early March, ahead of the pandemic,” Sam Khater, chief economist at Freddie Mac, said in a statement. communicated. “However, the rise in mortgage rates over the next two months will likely be more moderate compared to the past few weeks, and we expect a strong selling season in the spring.”

The recent hike in mortgage rates comes as Treasury yields hit their highest levels since the start of the pandemic. Investors have moved away from government bonds over the past two weeks in anticipation of another stimulus and reopening to fuel higher inflation. Mortgage rates generally move in tandem with the 10-year Treasury yield, meaning that growing optimism about the US recovery should raise rates further.

The Treasury market experienced its last shake on Friday morning when data detailing February’s job growth surprised on the upside. The US economy added 379,000 non-farm jobs last month, crushing the median estimate of 200,000 additions. The unemployment rate fell from 6.3% to 6.2%.

The encouraging trend immediately led to sell in the Treasury market. The 10-year rate rose to 1.626%, its highest level in over a year.

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