Mortgage rates jump to 3-month high as Treasury yields climb

Borrowers holding out for mortgage rates to keep dropping may have missed their chance.

After a two-week holding pattern, mortgage rates finally caught up with the growing Treasury yields and gradual economic recovery driven by the most recent stimulus package.

The 30-year fixed rate mortgage shot up 8 basis points to 2.81% from 2.73% one week earlier, according to Freddie Mac’s Primary Mortgage Market survey. That compares to a rate of 3.49% from the same time a year ago and it marks the highest weekly average since reaching 2.84% on the week ending Nov. 12, 2020.

The 10-year Treasury yield benchmark — a general indicator of interest rate movement — has been on an upward trajectory since the end of January, reaching its highest level since March 2020 this week. The strong yields, combined with boosted economic spending and downstream inflation made this week’s mortgage rate spike inevitable, Zillow Economist Matthew Speakman said in a separate press release.

“Investors also appear to be increasingly wary that more fiscal relief and accelerating economic growth through increased vaccination rates could translate to higher inflation,” Speakman said. “That’s something that would reduce the value of bonds’ fixed-payments, and possibly lead the Federal Reserve to raise interest rates and place more upward pressure on yields and mortgage rates.”

Industry forecasts predicted moderate interest rate growth over the course of 2021 and the recent market shift is suggestive of that outlook coming to fruition.

The average 15-year fixed-rate mortgage also rose, going to 2.21% from 2.19% the week before while falling from 2.99% the same time a year ago. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.77% with a 0.2 point average, down from 2.79% week-over-week and 3.25% year-over-year.