30-Year Mortgage Rate Tops 3% for First Time Since July

Mortgage rates fell throughout most of 2020 after the Covid-19 pandemic ravaged the economy. That helped power a boom in mortgage lending, fueled by refinancings. When rates hit 2.98% in July, it was their first time under the 3% mark in some 50 years of record-keeping.

The recent upward moves paint a clear contrast: More vaccinations in the U.S. and recent progress on the latest coronavirus relief bill have brightened investors’ outlook on the economy, a key variable in determining borrowing rates.

Mortgage rates tend to move in the same direction as the yield on the 10-year Treasury, which has been rising. Treasury yields rise when investors feel confident enough in the economy to forgo safe-haven assets such as bonds for riskier ones including stocks.

Freddie Mac chief economist Sam Khater said he expects a strong sales season, partly because he thinks “the uptrend in rates from here will be more muted than the past few weeks.” The Federal Reserve has said it would maintain ultralow interest rates until the economy improves.

“The Fed has seen the carnage from the last crisis, and they don’t want to pre-empt the recovery by starting to raise rates and choking off that nascent recovery,” Mr. Khater said.

However, rising rates have started to weigh on home purchase and refinance applications in recent weeks.

Write to Orla McCaffrey at [email protected]

Mortgage rates fell throughout most of 2020 after the Covid-19 pandemic ravaged the economy. That helped power a boom in mortgage lending, fueled by refinancings. When rates hit 2.98% in July, it was their first time under the 3% mark in some 50 years of record-keeping.

The recent upward moves paint a clear contrast: More vaccinations in the U.S. and recent progress on the latest coronavirus relief bill have brightened investors’ outlook on the economy, a key variable in determining borrowing rates.

Mortgage rates tend to move in the same direction as the yield on the 10-year Treasury, which has been rising. Treasury yields rise when investors feel confident enough in the economy to forgo safe-haven assets such as bonds for riskier ones including stocks.

Freddie Mac chief economist Sam Khater said he expects a strong sales season, partly because he thinks “the uptrend in rates from here will be more muted than the past few weeks.” The Federal Reserve has said it would maintain ultralow interest rates until the economy improves.

“The Fed has seen the carnage from the last crisis, and they don’t want to pre-empt the recovery by starting to raise rates and choking off that nascent recovery,” Mr. Khater said.

However, rising rates have started to weigh on home purchase and refinance applications in recent weeks.

Write to Orla McCaffrey at [email protected]