Average long-term U.S. mortgage rates this week rose sharply for a second straight week as expectations grew that the Federal Reserve may soon raise its key short-term interest rate.
Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage jumped to 3.98 percent from 3.87 percent a week earlier. Nearing 4 percent, it was the highest level for the 30-year rate since July. The rate on 15-year fixed-rate mortgages climbed to 3.20 percent from 3.09 percent.
A year ago, the average 30-year mortgage rate was 4.01 percent, while the rate for 15-year loans was 3.20 percent.
While it kept the key rate at a record low near zero, the Fed recently signaled the possibility a rate hike could come at its next meeting in December.
An unexpectedly strong employment report for October, released by the government last Friday, amplified expectations of a rate increase. It showed that hiring swelled last month by the largest amount this year – 271,000 jobs – while unemployment dropped another notch to 5 percent.
The market speculation on a Fed increase has brought plunging U.S. government bond prices and soaring yields, which rise as prices fall. The yield on the 10-year Treasury bond, which mortgage rates have been tracking, surged to 2.34 percent Wednesday from 2.22 percent a week earlier. The yield was at 2.32 percent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of 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 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged at 0.6 point last week. The fee for a 15-year loan also remained at 0.6 point.
The average rate on five-year adjustable-rate mortgages jumped to 3.03 percent from 2.96 percent; the fee held at 0.4 point. The average rate on one-year ARMs rose to 2.65 percent from 2.62 percent; the fee was steady at 0.2 point.
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