UPDATE: Mortgage rates jump as bond selloff drags on and housing runs out of steam
By Andrea Riquier
Rates may ease next week, in line with this week's move in Treasury yields
Rates for home loans jumped to a six-week high as bonds sold off in the wake of hawkish comments from the central bank and expectations for tax reform, mortgage provider Freddie Mac said Thursday (http://www.freddiemac.com/pmms/pmms_archives.html).
The 30-year fixed-rate mortgage averaged 3.85% during the October 5 week, up two basis points. The 15-year fixed-rate mortgage averaged 3.15%, also up two basis points. The 5-year Treasury-adjusted hybrid adjustable-rate mortgage averaged 3.18%, down from 3.20%.
Mortgage rates have resumed their close relationship with the benchmark U.S. 10-year Treasury yield. Treasurys soared after the November presidential election, when investors began to anticipate stronger economic growth, inflation from tax cuts, and less regulation.
Bond yields rise when prices decline.
Also read:Blacks make up 13% of the population but only got 6% of the mortgages last year (http://www.marketwatch.com/story/blacks-make-up-13-of-the-population-but-only-got-6-of-the-mortgages-last-year-2017-09-29)
That so-called Trump Trade unwound over the first half of the year, but sprang back to life in the past few weeks after Washington Republicans advanced tax reform plans and investors continued to anticipate more hawkish moves from the Federal Reserve.
Several Fed officials have suggested they remain on track to continue raising interest rates even as inflation remains tepid. Higher rates would diminish the value of bonds that have already been issued.
Also read:Yellen says Fed should be 'wary' of raising rates 'too gradually' (http://www.marketwatch.com/story/yellen-says-fed-should-be-wary-of-raising-rates-too-gradually-2017-09-26)
Rates for home loans follow bond yields with a bit of a lag. Treasurys rebounded earlier this week (http://www.marketwatch.com/story/treasury-yields-continue-rise-as-trump-tax-cut-returns-to-agenda-2017-10-03) as investors gauged the September selloff to be excessive, so mortgage rates may creep lower next week.
Meanwhile, momentum in the housing market has stalled amid a dearth of supply. That prompted the National Association of Realtors to cut its forecast for 2017 sales (http://www.marketwatch.com/story/home-contract-signings-tumble-to-near-2-year-low-hit-by-hurricanes-and-tight-supply-2017-09-27) last month. The trade group now expects full-year sales will be lower than in 2016.
-Andrea Riquier; 415-439-6400; AskNewswires@dowjones.com
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10-06-17 0657ETCopyright (c) 2017 Dow Jones & Company, Inc.