Mortgage rates have increased for five consecutive weeks, according to Bankrate data, bringing interest on a 30-year fixed rate loan to 4.44 percent—the highest level in 11 months—while home prices continue to rise due to a lack of available homes.
Inflation and wage growth recently found a groove, while the Federal Reserve’s plan to raise short-term interest rates multiple times for a consecutive year has reduced the value of government debt.
(Bond prices and yields are inversely related.)
Homebuyers Should Get off the Fence Mortgage rates are moved by the yield on 10-year Treasuries, rather than short-term rate hikes by the Fed.
That’s why mortgage rates fell throughout 2017, for instance, even as the central bank raised the federal funds rate three times.
Immediately after the 2016 election, investors sold government debt en masse, causing the 10-year yield to rise from 1.88 percent on November 8 to 2.60 percent five weeks later.
That dramatic rise was predicated on investors thinking a newly Republican-controlled Washington would bring about faster economic growth through infrastructure spending and tax cuts.
By the first week of September, the 10-year yield was 2.05 percent.
Prices have been rising below the Fed’s 2 percent target, according to the central bank’s preferred prices gauge, for years now.
Meanwhile, Bloomberg reported in January that China, the largest foreign holder of U.S. debt, may reduce or cease U.S. debt purchases, causing market jitters.