Rising bond yields lead to higher mortgage rates

Mortgage rates rose to their highest level in almost four years, as worries over inflation drove the 10-year Treasury yield to just shy of 3%.

30-Year FRM 15-Year FRM 5/1-Year ARM Average Rates 4.38% 3.84% 3.63% Fees & Points 0.6 0.5 0.4 Margin N/A N/A 2.75

The 30-year fixed-rate mortgage averaged 4.38% for the week ending Feb. 15, up from last week when it averaged 4.32%. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.15%.

"Wednesday’s Consumer Price Index report showed higher-than-expected inflation; headline consumer price inflation was 2.1% year-over-year in January two-tenths of a percentage point higher than the consensus forecast," Len Kiefer, Freddie Mac’s deputy chief economist, said in a press release. "Inflation measures were broad-based, cementing expectations that the Federal Reserve will go forward with monetary tightening later this year."

"Following this news, the 10-year Treasury reached its highest level since January 2014, climbing above 2.9%. Mortgage rates have also surged. After jumping 10 basis points last week, the 30-year fixed-rate mortgage rose 6 basis points, its highest level since April 2014."

The 15-year fixed-rate mortgage this week averaged 3.84%, up from last week when it averaged 3.77%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.35%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.63% this week with an average 0.4 point, up from last week when it averaged 3.57%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.18%.

"There is a growing consensus that fiscal stimulus from the combination of recent tax reform legislation and greater federal spending could overheat the economy which would hasten the next recession," Aaron Terrazas, Zillow’s senior economist, said when that company released its own rate tracker on Wednesday. "This week financial market volatility is likely to continue dominating headlines. However, the trend in mortgage rates is clearly upward and home shoppers are increasingly having to grapple with how higher mortgage rates will shift their budgets."

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Glenn McCullom

Glenn McCullom is the copy editor of National Mortgage News.

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