The rates for 30-year home loans in the US jumped this week, hitting its highest level in eight months amidst improving economic conditions and the end of the government’s move to push down interest rates.
According to a weekly survey of conforming mortgage rates released by Freddie Mac, the average rate this week was 5.21 percent, compared to 5.08 percent last week and 4.87 percent in 2009. It has not been higher since the week ending August 13, when it reached 5.29 percent.
Rates had declined to an all-time low of 4.71 percent in December last year, when the Federal Reserve tried to cut the borrowing costs for consumers. The programme ended last week but the Fed still considers the possibility of reviving the programme if economic conditions worsen again.
Freddie Mac collects mortgage rates from Monday through Wednesday of each week from lenders around the US. The average rates significantly fluctuate within a given day, often tracking the interest rates paid on long-term Treasury bonds.
The Treasury yields have increased steadily in recent weeks due to weak demand. The government is offering better interest rates to sell its bonds, as investors shifted toward stocks and riskier corporate debt.
"Once again, mortgage rates followed bond yields higher amid a positive March employment report," said Frank Nothaft, chief economist and vice president of Freddie Mac.
The average 15-year fixed-rate mortgage for this week ending April 8 hit 4.52 percent, up from last week’s 4.39 percent. This marks the highest weekly mortgage average since December 31, when it reached an average of 4.54 percent.
According to Mr. Nothaft, the homebuyer tax credit is making a huge impact on housing market activity, and many first-time homebuyers are utilizing the government-insured mortgages for their purchases.
"Compared to the week ending Dec. 4, 2009, which was the first week after the original expiration date [of the first-time home-buyer tax credit], mortgage applications for home purchases are up 17 percent for the first week in April of this year for government-insured loans, compared to an 11 percent decline in conventional loans, according to the Mortgage Bankers Association," said Mr. Nothaft.