The first rise in average mortgage rates seen in eight weeks has been more pronounced for longer-term loans, Freddie Mac said Thursday morning, as the rate-indicative 10-year Treasury yield rose once again.
Part of the reason for the increase in mortgage rates could be investors’ departure from the influential Treasury market as the Federal Reserve has stepped in with its quantitative easing move. But “overall jitteriness on the part of investors” also may lie behind the trend, Freddie Mac chief economist Frank Nothaft told this publication.
“The Fed hasn’t done anything quite like this previously”—with the exception of its earlier QE purchases of government-related securitized mortgages and Treasury bonds, he said. “There’s just some nervousness about what the impacts are in the capital markets as well as concerns about inflation long term. Investors require additional premium on long-term bonds if they think inflation may be higher in the future.” The 10-year Treasury yield was 2.95% as of late Thursday morning. Less than a week ago it was below 2.7%.
Short-term rates, in contrast to long-term ones, have been more stable or increased to a lesser degree because “there’s really no fear of inflation in the next 12 months,” he said.
The average 30-year fixed mortgage rate for the week ending Nov. 18 has jumped to 4.39% from 4.17% a week ago and the 15-year fixed rate has bounced upward to 3.76% from 3.57%. The average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage increased to a somewhat lesser extent, rising to 3.40% from 3.25%, and the average one-year Treasury ARM rate remained unchanged at 3.26%.
Average points for longer-term loans in the latest week were relatively higher as well. This was particularly true for 30-year product at 0.9. Points in the latest week averaged 0.7 for 15-year and five-year Treasury hybrid product, and 0.6 for one-year Treasury ARM product.
Freddie Mac’s quarterly product transition reports through the third quarter have borne out what is largely a continuing borrower preference for longer-term mortgage products, although 15-year payments have become more affordable for some, driving some increased interest in that sector.
On a year-to-year basis, all rates in the latest week still remained relatively low. A year ago, the 30-year rate was 4.83%, the 15-year rate was 4.32%, the five-year Treasury hybrid rate was 4.25% and the one-year Treasury ARM rate was 4.35%.
