Photographer: Chris Rank/Bloomberg

Mortgage Rates Soar to 10-Month High After Trump Bond Rout

  • Average 30-year fixed rate jumps to 3.94%, Freddie Mac Says
  • Federal Reserve seen boosting borrowing costs in December

U.S. mortgage rates skyrocketed to a 10-month high as investors reacted to Donald Trump’s presidential election win by pulling money out of the bond market, driving up yields that guide home loans.

The average rate for a 30-year fixed mortgage was 3.94 percent, up from 3.57 percent last week and the highest since January, Freddie Mac said in a statement Thursday. The average 15-year rate rose to 3.14 percent from 2.88 percent, the McLean, Virginia-based mortgage-finance company said.

Yields on 10-year Treasuries have jumped by more than 35 basis points since last week’s election as investors wager that Trump’s policies will spur faster growth and inflation. Higher borrower costs will damage homebuyer affordability at a time of rising prices -- though an improving job market may help to prop up housing demand.

“We were already expecting rates to go up anyway, and this is giving them more of a short-term boost,” said Matthew Pointon, U.S. property economist for Capital Economics Ltd. “If the rise in interest rates is accompanied by higher earnings and banks relax lending standards, that will keep sales rising gradually over the next year.”

Home-loan costs had been hovering near record lows, with the average 30-year mortgage rate sitting below 4 percent since the start of the year. With this week’s jump, the monthly payment on a $300,000 loan has climbed to $1,422 from $1,354 at the start of November.

Refinancing Applications

The increase in mortgage rates is likely to further limit demand for refinancing, which has been falling since July, data from the Mortgage Bankers Association show. An index of refinancing applications dropped 11 percent in the week ended Nov. 11 to the lowest level since March. The group’s seasonally adjusted purchase index slid 6 percent to the lowest since January.

Traders are betting with near certainty that the Federal Reserve will raise interest rates in December. Fed Chair Janet Yellen said a hike could be appropriate “relatively soon” as the economy strengthens, according to the text of testimony delivered Thursday before Congress’s Joint Economic Committee.

While homebuyers and people waiting to refinance may have missed out on the best rates, there’s still a chance costs will come back down, said Greg McBride, senior financial analyst for Bankrate.com.

“The window of opportunity may open up once again if the administration’s eventual plans fall short of expectations, or if something like slower economic growth or a stock-market pullback materializes,” he said in an e-mailed statement.

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