US rate on 30-year mortgages rises to 3.97%
Average long-term United States (US) mortgage rates rose slightly this week in the days before the Federal Reserve announced a historic increase in its key short-term interest rate.
Mortgage buyer Freddie Mac said on Thursday the average rate on a 30-year fixed-rate mortgage edged up to 3.97 per cent from 3.95 per cent a week earlier. The average rate on 15-year fixed-rate mortgages increased to 3.22 per cent from 3.19 per cent.
The key 30-year rate is well above its level of a year ago, 3.80 per cent. The rate has increased significantly overall since the end of October, when it stood at 3.76 per cent. But it remains historically low at below four per cent.
The Fed announced on Wednesday a quarter-point increase in its benchmark funds rate, to a range of 0.25 per cent to 0.5 per cent. It was the Fed's first rate hike in nine years. The Fed policymakers coupled the hike with a signal that further increases will likely be made slowly, as the economy strengthens further and inflation rises from undesirably low levels.
The Fed's move isn't likely to drive a jump in the rates that people pay for mortgages anytime soon. The Fed's funds rate - the rate that banks charge each other on overnight loans - has limited influence on home borrowing rates.
The yield on the 10-year Treasury bond, which mortgage rates have been tracking, rose to 2.30 per cent on Wednesday from 2.21 per cent a week earlier. Yields on the US government bonds move in the opposite direction of the bonds' prices. The yield fell to 2.25 per cent on Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals one per cent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan remained at 0.5 point.