U.S. mortgage rates rose for a sixth week, extending a surge in interest costs spurred by speculation that the Federal Reserve will scale back stimulus efforts.
The average rate for a 30-year fixed mortgage climbed to 3.98 percent, a 14-month high, from 3.91 percent last week, McLean, Virginia-based Freddie Mac said in a statement. The average 15-year rate increased to 3.1 percent from 3.03 percent.
Borrowing costs have jumped in past month, pushing buyers to lock in deals before rates climb even further. Home-loan applications increased for the first time in five weeks, the Mortgage Bankers Association said yesterday. The group’s refinancing index gained 5 percent in the period ended June 7, while the purchase gauge advanced 4.7 percent.
“Mortgage applications for home purchases have built a bottom and are grinding higher,” John Herrmann, director of U.S. rate strategy at Mitsubishi UFJ Securities USA Inc. in New York, said yesterday in a note to clients. “Sales to investors and all-cash deals have accounted for a significant portion of home sales over the past two years. Going forward, the true recovery in housing needs to be led by households purchasing homes on margin.”
At the current 30-year average, monthly payments for a $300,000 loan would be about $1,429, up from $1,322 in early May, when borrowing costs hovered near record lows.
Rising demand for a tight supply of listings is fueling price gains. U.S. home prices in April jumped 12.1 percent from a year earlier, the most since February 2006, according to CoreLogic Inc., an Irvine, California-based data provider.
While increasing rates may damp home sales temporarily, “we do not think it will derail the recovery,” Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, wrote yesterday in a note to clients. “A powerful counter to rising rates is the improvement in expectations about the housing market, as well as low inventory.”
Mortgage rates have been following a surge in 10-year Treasury yields, which touched an almost 14-month high on June 11 amid concern that the central bank may slow purchases of U.S. government debt as the economy improves.
The record rate for a 30-year loan is 3.31 percent, reached in November, according to Freddie Mac. The 15-year average fell to a record-low 2.56 percent last month.