Long-term U.S. mortgage rates rose this week amid expectations in financial markets that an increase in interest rates by the Federal Reserve may be on the horizon. Even with an increase in mortgage rates, they are at historically low levels making it an option to keep money in investments by financing home purchases. If buyers have the cash, putting their money to work through investments can create an interest-free mortgage or an income generator.
Mortgage giant Freddie Mac said Thursday the average for the benchmark 30-year fixed-rate mortgage was 3.46 percent, up from 3.43 percent last week. The average rate is down from 3.89 percent a year ago and is close to its all-time low of 3.31 percent in November 2012.
The 15-year fixed mortgage rate increased to 2.77 percent from 2.74 percent.
Fed Chair Janet Yellen said in a speech last Friday that the case for the Fed raising interest rates has been bolstered by a solid job market and an improved outlook for the U.S. economy and inflation. But she stopped short of offering any timetable. The central bank's policymakers are scheduled to meet next on Sept. 20-21.
Following Yellen's speech, investors' expectations of a possible rate increase pushed the prices of U.S. Treasury bonds lower and drove up to their yields.
Long-term mortgage rates tend to track the yield on 10-year Treasury notes, which rose to 1.58 percent Wednesday from 1.56 percent a week earlier. It increased further to 1.60 percent 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 1 percent of the loan amount.
The average fee for a 30-year mortgage fell to 0.5 points this week from 0.6 points last week. The fee for a 15-year loan was unchanged at 0.5 points.
Rates on adjustable five-year mortgages averaged 2.83 percent, up sharply from 2.75 percent last week. The fee remained at 0.4 point.
Associated Press. "U.S. Average 30-Year Mortgage Rate Rises to 3.46%." Florida Realtors, 1 Sept. 2016. Web. 2 Sept. 2016.