WASHINGTON — Average long-term U.S. mortgage rates rose this week for the third straight week. Long-term rates have reversed the upward trend that took hold at the start of the year amid economic anxiety and market turbulence.
However, rates still remain at historically low levels at the start of the spring home buying season. Mortgage buyer Freddie Mac said Thursday the average rate on a 30-year, fixed-rate mortgage increased to 3.73 per cent from 3.68 per cent last week. The benchmark rate is closer to yet still below the 3.78 per cent level it marked a year ago.
The average rate on 15-year fixed-rate mortgages rose to 2.99 per cent from 2.96 per cent last week.
The Federal Reserve decided this week to keep a key interest rate unchanged in light of global pressures that risk slowing the U.S. economy. As a result, Fed officials expect to raise rates more gradually this year than they had envisioned in December. The officials now foresee two, rather than four, modest increases in the benchmark short-term rate during 2016.
Prices of U.S. government bonds rose sharply after the Fed decision was announced Wednesday, reversing a decline in prices earlier in the week. The increase in bond prices pushed down the yields on the bonds, which mortgage rates track. The yield on the 10-year Treasury bond stood at 1.91 per cent Wednesday, down from 1.97 per cent Tuesday but above 1.88 per cent a week earlier. The yield was unchanged at 1.91 per cent Thursday morning.
Lower interest rates also make stocks look more attractive to investors. In contrast to the market turbulence in the first weeks of the year, U.S. stocks are now on track for their fifth straight week of gains and the Dow Jones industrial average and Standard & Poor's 500 index closed Wednesday at their highest levels since the first trading day of the year.
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 per cent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year loan declined to 0.4 point from 0.5 point.
Rates on adjustable five-year mortgages averaged 2.93 per cent this week, up from 2.92 per cent last week. The fee rose to 0.5 point from 0.4 point.
The Associated Press