Mortgage rates continued rising in the last week, eventually breaching 4% for the first time since last summer, according to Freddie Mac’s latest Primary Mortgage Market Survey. Freddie Mac’s report, which was released Thursday morning, shows that the 30-year fixed-rate mortgage rose to an average of 4.04% for the week ending Jan. 18, 2018. That continued a recent trend of mortgage rates climbing. Last week, the 30-year mortgage checked in at 3.99%. In fact, this week’s average of 4.04% was the first time that benchmark interest rate broke 4% since July 2017. Interest rates are also the highest they’ve been since May 2017. A year ago at this time, interest rates averaged 4.09%.
Last week, Zacks, which provides research for investors, predicted that interest rates would climb due to the rise in Treasury yields, and that’s just what happened. Here’s Zack’s explanation of the relationship between Treasury yields and mortgage rates: There is a strong correlation between mortgage interest rates and Treasury yields, according to a plot of 30-year conventional mortgages and 10-year Treasury yields using Federal Reserve Economic Data. Mortgage interest rates are higher than Treasury yields because mortgages are riskier than Treasury bonds. The risk is that some homeowners get into financial difficulty and default on their mortgage obligations. The difference, or spread, between Treasury yields and mortgages interest rates, is the risk premium. So, as Treasury yields rise, so do mortgage rates.
And as Freddie Mac Deputy Chief Economist Len Kiefer explains, interest rates may not fall back below 4% for some time, if at all. “Some may be wondering if this is the last time we’ll see a three handle on the 30-year mortgage rate,” Kiefer said. “Never say never, but inflation is firming, the Federal Reserve’s Beige Book indicates broad-based economic growth and labor markets are tightening. This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.”
Additionally, Freddie Mac’s report showed that the 15-year FRM averaged 3.49%, up from last week when it averaged 3.44%. A year ago at this time, the 15-year FRM averaged 3.34%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.46% this week, unchanged from last week. A year ago at this time, the 5-year ARM averaged 3.21%.
*Ben Lane is the Senior Financial Reporter for HousingWire
Shelter from the Storms: Pasadena Bad Weather Shelter open through March 1
Thanks for reading our post on Wheat Shop & Dots Café Open!On another matter, the Pasadena Bad Weather Shelter is open during the current bad weather season, on nights with a forecast of 40 degrees or below and/or 40 percent chance of rain until March 1. During the 2015-2016 winter, the last season with available records, the BWS was open a total of 33 nights. It served a total of 1,941 guests — 1,423 men and 518 women.
To find out if the shelter is open each night, call the BWS Hotline at (888) 915-8111. For all other questions, call(626) 797- 2402.