Mortgage Rates Climb to 4 Year High
U.S. mortgage rates climbed this week to their highest average in more than four years, ratcheting up affordability pressures at the start of the traditional spring home buying season. The average rate on 30-year fixed-rate mortgages climbed to 4.46 percent. This marks the highest average since January 2014. The 30-year rate averaged 4.21 percent a year ago. The average rate on 15-year, fixed-rate loans rose to 3.94 percent. Higher mortgage rates appear to be weighing on home sales, since buyers are facing higher borrowing costs. Home purchases slumped 3.2 percent from December to January, according to the National Association of Realtors. On a yearly basis, home sales have fallen 4.8 percent, the sharpest annual decline since August 2014. Mortgage rates have been heading upward for the past nine weeks. The interest rates charged on home loans usually hew close to changes in inflation and the interest paid on U.S. government debt. But the recent increases in mortgage rates have come even as the yield on the 10-year Treasury note has stayed below its two-week high of 2.95 percent. Home prices nationwide are up 48% since 2011, according to the National Association of Realtors. At the same time, incomes have only risen 15%. While mortgage rates have been rising, they are still historically low: they haven't been above 5% since 2011. However, experts do expect rates to continue to rise throughout the year and possibly hit 5% by the end of the year. Higher rates will only make the affordability problem worse.