Freddie Mac (FRE) announced Thursday that U.S. mortgage rates for 30-year fixed home loans rose 0.02 basis points this week, as the year’s record low borrowing costs produced the biggest jump in new home purchases in four years.
The average 30-year rate increased to 5.14% from 5.12% in the previous week. The mortgage rate was significantly higher than the record low of 4.78% set at the week ending April 2.
Long-term mortgage rates remained flat this week, near historical lows, which is helping sustain a high level of affordability in the home-purchase market.
Climbing mortgage rates may threaten a gain in home sales spurred by falling home prices, a government tax credit for first-time buyers, and a Federal Reserve program designed to lower borrowing costs. New home sales jumped more than expected in July and sales of existing homes rose to their highest level in almost two years.
Last year, the Federal Reserve decided to lower mortgage rates by buying bonds backed by home loans. It increased the size of its program to $1.25 trillion in March. These bonds purchased from Fannie Mae (FNM), Freddie Mac and Ginnie Mae brought down yields on mortgage-backed securities and allowed lenders to reduce rates on new loans while still selling the securities backed by them at a profit.
The plan helped cut mortgage rates to a record low 4.78% in April. Sales Increase Rates started climbing in May along with Treasury yields due to investor concerns that higher government debt would fuel inflation. The 30-year mortgage rate climbed to 5.59% in the week ended June 11 and has since fallen back.
The mortgage rates seem to be stabilizing now and indicate optimism after a long time.
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