Mortgage interest rates surged higher as Treasury bond rates moved above 3% in reaction to the end of quantitative easing by the Federal Reserve. The rate on a fixed 30-year mortgage rose to 4.60%, a hike from an average of 4.51% last week, according to Freddie Mac. The rates on other home mortgages also moved higher.
The 15-year fixed rate loan averaged 3.75%, up from 3.69% a week ago with 0.7 point. The 5-year Treasury indexed hybrid adjustable rate mortgage averaged 3.30%, a surge higher from 3.22% last week.
However, average interest rates offered by lenders on all mortgages except the 30-year loan remain lower than they were a year ago when the federal government was offering a tax incentive in an effort to increase home sales.
Home sales have fallen into a slump over the past couple of months across most of the U.S. despite low mortgage rates as a result of weak consumer confidence in the housing market, high unemployment and worries over the larger economy.
However, Freddie Mac chief economist Frank Nothaft remained upbeat about the market as it undergoes a transition during the summer home buying season. “Mortgage rates followed Treasury yields higher over the holiday week, but remain quite affordable by historical standards,” said Nothaft.
Refinancing home mortgages tumbled for the third straight week last week, according to the Mortgage Bankers Association, which surveys lenders across the U.S. weekly. The lenders’ index declined 9.2%, but rates still provide lower payments for those who can qualify.
“For instance interest rates on all mortgages outstanding in the first quarter of this year averaged just under 6%,” said Nothaft. “With today’s rates, these homeowners who have the ability to refinance could save $169 per month in interest payments on a $200,000 – 30-year fixed rate mortgage.”