Mortgage rates jumped to an eight-month high, making home purchases costlier as investors prepare for the Federal Reserve to raise interest rates.
The average rate for a 30-year fixed mortgage jumped to 4.04%,
Yields on 10-year Treasuries, which guide mortgages, approached 2.5% on Wednesday for the first time since October amid speculation the Federal Reserve is poised to end seven years of lending to banks at near-zero rates. A jobs report last week showed hiring at a five-month high, a sign the economy is strong enough to allow the Fed to boost borrowing costs.
"Interest rates are grinding higher as the probability of a Fed rate hike firms for September and the deflation scare in Europe eases," said Laura Rosner, a U.S. economist at BNP Paribas and former New York Fed researcher. "We're seeing stronger signs that things are back on track after a weak start to the year."
Low mortgage rates have helped bolster the housing market. Contracts to buy homes jumped 3.4% in April to the highest level in nine years and more than economists projected, according to the latest National Association of Realtors report. New-home sales rose 6.8% in April, also a bigger gain than economists expected.
