3 Reasons Mortgage Rates Are Rising
NEW YORK ( BankingMyWay) -- Mortgage rates are up for the fourth week in a row, and that has inquiring minds asking one big question:
Is the most attractive interest rate environment in history coming to an end?"
The latest numbers from Freddie Mac reveal that 30-year fixed mortgage interest rates are still well under 4%, at 3.66% last week.
The BankingMyWay Weekly Mortgage Tracker has the average 30-year rate at 3.75% this week.
Nevertheless, this is a trend that has economists taking a closer look.
Freddie not only says fixed-mortgage rates are up for the fourth straight week, the mortgage giant also says that the rate of new single-family home construction is at a five-month low. That means less new homes on the market, with higher rates on the ones that are available for homebuyers.
"Fixed mortgage rates inched upward this week along with other long-term yields," says Frank Nothaft, chief economist at Freddie Mac.
What's driving interest rates up? Here are three significant triggers:
1. Treasury bond yields are up
As Nothaft notes, bond yields are up of late, with 10-year U.S. Treasury notes yielding 1.68% in the past week, up from 1.5% at the beginning of August. While these rates are relatively low in a historical sense, mortgage rates do track the direction of Treasury rates, and right now, those rates are moving upward.
2. Housing data has improved
Freddie Mac also notes that existing home sales are climbing, after months of soft sales activity. In addition, the median home sales price has risen 9.4% from July 2011 to July 2012. In general, the healthier the housing market, the more interest mortgage lenders charge for home loans.
3. A quiet Eurozone
For months, economists (and some real estate agents) were wringing their hands over the sovereign debt crisis in Europe. Financial troubles in Greece, Italy, Portugal and other European countries sent tremors across the globe, causing anxiety among financial markets, and among mortgage lenders, who feared a major global financial crisis. But in August, at least, Eurozone debt has held less sway in media headlines and in the market, and the relative quiet across the pond has been good for the global economy.