Mortgage Rates for U.S. Fixed-Rate Loans Jump to Five-Month High
Mortgage Rates for U.S. Loans Jump to Five-Month High
Matthew Staver/Bloomberg
A "For Sale" sign stands outside a previously owned home on the market in Denver, Colorado.
A "For Sale" sign stands outside a previously owned home on the market in Denver, Colorado. Photographer: Matthew Staver/Bloomberg
U.S. mortgage rates surged to a five- month high, tracking a jump in bond yields after President Barack Obama agreed to extend tax cuts for two years.
The average rate for a 30-year fixed loan increased to 4.61 percent in the week ended today from 4.46 percent, the fourth week of gains, Freddie Mac said in a statement. The average 15- year rate climbed to 3.96 percent from 3.81 percent, according to the McLean, Virginia-based mortgage-finance company.
The agreement to extend tax cuts sent yields on mortgage- bond securities to six-month highs yesterday on speculation that the budget deficit may widen and inflation will accelerate. Rising borrowing costs from record-low levels may spur some prospective homebuyers to make purchases to lock in low rates, said Paul Dales, U.S. economist at Capital Economics Ltd.
“Once people see this might actually be the bottom, they go for it,” Dales said in a telephone interview from Toronto.
Mortgage applications for home purchases climbed 1.8 percent in the week ended Dec. 3, the third straight increase, the Washington-based Mortgage Bankers Association said yesterday. Total application volume dropped 0.9 percent as refinancing slumped, the group said.
The average rate for a 30-year loan fell to 4.17 percent last month, the lowest in Freddie Mac records dating to 1971. The rate averaged 5.97 percent during the past decade.
Still Cheap
“It’s still fair to say mortgage affordability is high and mortgage financing is cheap,” Dales said. “It’s just not as cheap as it was couple months ago.”
Pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October as low interest rates and reduced prices began to attract some buyers, the National Association of Realtors said Dec. 2.
Toll Brothers Inc., the largest U.S. luxury-home builder, saw deposits increase 10 percent in the final two weeks of November compared with a year earlier as mortgage rates began to climb, Chairman Robert Toll said Dec. 2.
“In the last two weeks, interest rates have been going up,” Toll said during a conference call. “So finally there is no longer a reason to sit and wait.”
The U.S. housing market is struggling to maintain a sustained recovery as foreclosures mount and unemployment hovers near 10 percent. The nation’s homes are poised to lose more than $1.7 trillion in value this year, Zillow Inc. said today. Prices will decline as much as 11 percent as the slump extends into 2012, according to a report from Morgan Stanley yesterday.
To contact the reporter on this story: Prashant Gopal in New York at Pgopal2@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel in New York at kwetzel@bloomberg.net
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