Blame Mario Draghi, the Italian economist who heads the European Central Bank, for this month's jump in U.S. mortgage rates. His success in cloning an American strategy to spur economic growth is keeping European investors at home.
The average rate for a 30-year fixed mortgage was 3.85% this week,
Economic growth in countries using the euro outpaced the U.S. in the first quarter, data showed Wednesday, as Draghi employed a quantitative-easing strategy — buying bonds to lower interest rates — pioneered by the Federal Reserve. Overseas investors last year filled the void left when the Fed pulled back from buying bonds, which helped keep mortgage rates low.
"The dire concern about the European economy has faded with Draghi's actions," said Mark Zandi, chief economist of Moody's Analytics Inc. in West Chester, Pa. "Investors who are scouring the planet for yields are not as concerned about keeping their money in safe havens."
The economy of the 19 countries that use the euro grew 0.4% in the three months through March, according to Eurostat, the European Union's statistical agency. The U.S. economy, meanwhile, grew 0.1% at an unannualized rate.
Higher mortgage rates may provide a bump in the road to a housing recovery regaining its footing after a lull last year. The National Association of Realtors' index of pending home sales rose 1.1% in March after a revised 3.6% jump in February that was the biggest since October 2010, the group said late last month.
Sales of previously owned homes jumped in March by the most in four years, the Realtors group said in an April 22 report. Properties on the market were snapped up in 52 days on average, the fastest pace since July. The median price of an existing home jumped 7.8% from a year earlier, the most since February 2014.
Rates for 30-year loans began rising from a near-record low of 3.35% in May 2013 after the Fed signaled it would start to unwind its stimulus plan aimed at keeping borrowing costs down. While the central bank stopped buying new mortgage bonds, it is keeping a foothold in the market by reinvesting the proceeds of maturing securities.
