An improved economic outlook has led mortgage rates over the 5% mark for the first time since April of last year. Long-term bond yields are also up, which has added upward pressure on mortgage rates. See the following article from The Street for more on this.
Mortgage rates topped 5% for the first time in nine months, Freddie Mac (FMCC.OB) said on Thursday, as positive economic signals have led the bond markets to price in higher inflation.
Traditional 30-year fixed-rate mortgages hit 5.05%, on average, during the week ended Thursday, up sharply from the prior week, which averaged 4.81%. Those home loans are also up from a year-ago, when 30-year fixed mortgages cost 4.97%. Shorter-term fixed rate mortgages also rose, as did adjustable rate mortgages pegged to U.S. Treasury bonds also rose, according to Freddie Mac.
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"Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week," Freddie’s chief economist, Frank Nothaft, said in a statement. He noted that rates are now at the highest level since April 2010.
Recent economic data have shown increases in nonfarm productivity and improvements in employment data as the economy starts to regain its footing. The unemployment rate for January unexpectedly declined to 9% from 9.4% while nonfarm productivity in 2010 climbed 3.6% — the biggest gain in eight years.
Investors have moved from long-term bonds into higher yielding securities like stocks. The Dow Jones Industrial Average recently sailed past 12,000. Since mid-January, $18.4 billion has flowed into long-term mutual funds that invest in stocks, according to the Investment Company Institute.
But the changing rate environment also puts pressure on the housing market, which is still in a nascent recovery, held back by a backlog of foreclosures. The Obama administration and Federal Reserve have strived to keep interest rates low for as long as possible to stimulate home purchases and support pricing.
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