Mortgage rates poised to rise as U.S. Treasury yields surge
LOS ANGELES (AP) — The long period of record-low rates on home loans could soon be over.
Long-term bond yields, which can influence interest rates on mortgages and other consumer loans, are climbing this month amid expectations of higher U.S. government spending on pandemic relief and an economy recovery as more people get vaccinated for COVID-19.
The yield on the 10-year Treasury briefly hit 1.18% earlier this week. That’s up from less than 0.90% at the start of the year and the highest since last March. Yields rise when bond prices fall.
Economists forecast further modest mortgage rate rises this year. While that's unlikely to derail the red-hot housing market, it could make it tougher for would-be homebuyers.
“As bright as the prospects are for the economy after vaccines have reached critical mass, there are still a lot of economic sore spots that we have to work through between now and then,” said Greg McBride, chief financial analyst at Bankrate. “It’s still going to be a very low-rate environment, even for long-term rates like mortgages.”
Home loan rates tend to track moves in the 10-year Treasury yield. Damage from the coronavirus pandemic on the U.S. and global economies fueled demand for U.S. bonds, pushing their yields lower. As a result, home loan rates also fell through most of 2020.
The average rate on the benchmark 30-year fixed-rate home loan slipped to 2.65% last week, a record low, according to mortgage buyer Freddie Mac. The rate stood at 3.64% a year ago.
McBride forecasts that the average rate on a 30-year mortgage will rise to 3.1% by the end of the year. That’s in line with the National Association of Realtors’ outlook and close to the 3.2% forecast from the Mortgage Bankers Association.
Record-low mortgage lending rates helped...
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