Average U.S. rates on fixed mortgages rose this week for a second straight week, but remained near historic lows.
Mortgage buyer Freddie Mac said Thursday the average rate for a 30-year loan increased to 4.20 percent from 4.14 percent last week. The average for the 15-year mortgage jumped to 3.31 percent from 3.23 percent.
Rising prices and higher interest rates beginning in mid-2013 have made homes less affordable for would-be buyers. At the same time, a limited supply of homes is available to buy. Mortgage rates are about a quarter of a percentage point higher than they were at the same time last year.
Mortgage rates tend to follow the yield on the 10-year Treasury note. The 10-year note traded at 2.64 percent Wednesday, up from 2.60 percent a week earlier and 2.44 percent the previous week. Speculation over the European Central Bank’s decision last week to cut interest rates to the point of charging banks for depositing money at the ECB sent foreign buyers into the U.S. bond market.
The increase in mortgage rates over the past year or so was driven in part by speculation that the Federal Reserve would reduce its bond purchases, which have helped keep long-term interest rates low. Indeed, the Fed has announced four declines in its monthly bond purchases since December, because the economy appears to be steadily healing. But the Fed has no plans to raise its benchmark short-term rate from record lows.
Fed Chair Janet Yellen has told Congress that the economy is improving, but noted that the job market remains “far from satisfactory” and that inflation is still below the Fed’s target rate. She said she expects the Fed’s near-zero target for short-term rates to remain appropriate for a “considerable time” after the bond purchases end.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday 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 rose to 0.6 points, from 0.5 points a week earlier. The fee for a 15-year loan held steady at 0.5 points.
The average rate on a one-year adjustable-rate loan was unchanged at 2.40 percent. The average fee remained at 0.4 points.
The average rate on a five-year adjustable mortgage jumped to 3.05 percent from 2.93 percent. The fee was stable at 0.4 points.