Mortgage Rates

Hello everyone,

Well, the news for mortgage rates has been bad. Rates continue to rise. Here's an article I took from Yahoo finance:

NEW YORK (AP) -- The yield on the Treasury's 10-year note passed 5 percent Thursday, hitting a 10-month high as investors see their hopes for an interest rate cut evaporating.

The 10-year yield broke through 5 percent mark overnight and rose as high as 5.07 percent in mid-morning trading in New York, reaching its highest point since late July. U.S. bond markets were following a trend toward lower prices and higher yields in trading abroad.

Some market experts say the 10-year yield is likely to climb higher as bond prices weaken -- making it even harder for consumers to finance home puchases, and also for companies to borrow money.

Fixed mortgage rates, closely linked to the 10-year yield, have been advancing recently, adding to worries about sluggish home sales and faltering home prices. The average U.S. 30-year fixed mortgage rate was at 6.12 percent Thursday, up from 5.98 percent a week ago, according to Bankrate.com. The average 15-year fixed mortgage was at 5.82 percent, up from 5.69 percent last week.

Mortgage rates have been boosted by swelling Treasury yields, which have lifted in part because investors are less sure the Federal Reserve will lower interest rates by the end of the year -- let alone by July or August, as many traders predicted a few months ago. Economic data has appeared too strong to warrant a rate cut anytime soon; despite the sluggish housing market, the job market has remained stable, wages keep ticking up and manufacturing activity is clawing its way back from stagnancy.

The United States isn't alone in rising yields. Bond yields in the Eurozone, Great Britain, Japan, and other economies have been ticking up as central banks around the world gradually hike interest rates to curb inflation -- which appears to be accelerating now as it catches up to strong global growth over the past few years.

On Thursday, New Zealand's central bank surprised markets by raising its key interest rate to a record high 8 percent from 7.75 percent, hoping to curtail inflation. And on Wednesday, the European Central Bank raised its key rate to the highest level in nearly six years on Wednesday and left open the possibility of more increases.

In 2006, the 10-year U.S. Treasury note's yield peaked in early July at about 5.23 percent; the last time it traded above that level was in 2002.

John Shea
Vice President
Summit Mortgage
781-224-2809 (office)
jshea@summitmortgage.com