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Rates for home loans throttled to a near-five-year high as strong economic data and rising commodity prices drove a selloff in bonds.
The 30-year fixed-rate mortgage averaged 4.58%, according to Freddie Mac’s weekly survey, out Thursday. That marked an 11 basis point gain during the previous week, and the highest since August 2013. The 15-year fixed-rate mortgage averaged 4.02%, up from 3.94%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.74%, up 7 basis points during the week.
Those rates don’t include fees associated with obtaining mortgage loans.
Mortgage rates follow the yields of the benchmark U.S. 10-year Treasury note. Investors have ditched bonds as economic data remains strong and inflation firms, eroding the value of fixed-income assets. Bond yields rise as prices decline.
In the housing market, meanwhile, supply remains lean and demand hot. That’s pushing home prices higher, and rising mortgage rates won’t help those who are trying to buy.
Jason van den Brand, CEO of Lenda, an online mortgage lender, has watched as rising rates have shaped his business. At the end of last year, van den Brand said, about 15-20% of Lenda’s mortgage applications were for purchases. As refinances have dried up, the share taken by purchases has tripled, he said. At the same time, cash-out refinances as a share of the total refinance applications has roughly doubled.
Van den Brand has been around the mortgage industry long enough to be uneasy about offering rate forecasts, but he’s certain about one thing: for the housing market, “there’s still a lot of room to grow.”
“People want to buy homes, and they’re in a position to buy homes,” van den Brand told MarketWatch. Now the biggest challenge in the market is finding supply to sate that demand.
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