WASHINGTON — Long-term U.S. mortgage rates rose this week, marking new highs for the year. An increase in a key interest rate is expected by the Federal Reserve next week, propelled by signs of strength in the economy.
Mortgage buyer Freddie Mac said Thursday the rate on 30-year, fixed-rate loans climbed to 4.21 per cent from 4.10 per cent last week. The benchmark rate stood at 3.68 per cent a year ago and averaged 3.65 per cent through 2016, the lowest level in records dating to 1971.
The rate on 15-year mortgages increased to 3.42 per cent from 3.32 per cent last week.
Mortgage rates rose for nine straight weeks following President Donald Trump's election in November. But they fell at the start of the year and then moved little in recent weeks.
Fed Chair Janet Yellen has signalled that the central bank likely will decide at its policymakers' meeting next week to resume raising its key interest rate, reflecting a strengthening job market and inflation edging toward the Fed's 2 per cent target. Yellen also recently said that the Fed expects steady economic improvement to justify additional rate increases.
Investors' views of expanding economic growth and rising inflation drove prices of long-term Treasury bonds lower over the past week. That pushed up their yields because inflation would erode the bonds' value over time, a prospect causing investors to demand higher yields.
Bond yields move opposite to prices and influence long-term mortgage rates. The yield on the 10-year Treasury note jumped to 2.56 per cent Wednesday from 2.46 per cent a week earlier. It rose further to 2.58 per cent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 per cent of the loan amount.
The average fee for a 30-year mortgage was unchanged this week at 0.5 point. The fee on 15-year loans also remained at 0.5 point.
Rates on adjustable five-year loans rose to 3.23 per cent from 3.14 per cent last week. The fee held at 0.4 point.
The Associated Press