Mortgage rates were pushed to yearly highs this week by soaring bond yields, according to the latest data released Thursday by Freddie Mac.
Bond yields around the world spiked to their highest levels of the year earlier this week. The 10-year Treasury and the 10-year German bund each hit heights not seen since September. Other countries’ bond yields also posted big gains.
Because a rise in bond yields often signals an upturn in mortgage rates, it was not surprising to see home loan rates follow suit.
The 30-year fixed-rate average jumped to 4.04 percent with an average 0.6 point, moving above the 4 percent mark for the first time in seven months. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.87 percent a week ago and 4.2 percent a year ago. Since late April, the 30-year fixed rate has risen 39 basis points.
The 15-year fixed-rate average climbed to 3.25 percent with an average 0.6 point, rising to its highest level since October. It was 3.08 percent a week ago and 3.31 percent a year ago.
Hybrid adjustable rate mortgages were mixed. The five-year ARM average rose to 3.01 percent with an average 0.4 point, matching its highest mark of the year. It was 2.96 percent a week ago and 3.05 percent a year ago.
The one-year ARM average fell to 2.53 percent with an average 0.2 point. It was 2.59 percent a week ago.
“Mortgage rates rose above 4 percent for the first time since November 2014 as Treasury yields surged,” Len Kiefer, Freddie Mac deputy chief economist, said in a statement.
“Markets are responding to strong employment data. In May, the U.S. economy added 280,000 jobs. Moreover, job openings surged to 5.4 million in April, up over 20 percent from a year ago.”
The fear that low rates are now a thing of the past spurred activity in the mortgage market from new home buyers and those looking to refinance.
Applications rose for the first time in nearly two months, according to the latest data from the Mortgage Bankers Association.
After falling for six weeks in a row, the market composite index, a measure of total loan application volume, jumped 8.4 percent from the previous week. The refinance index increased 7 percent, while the purchase index grew 10 percent.
The refinance share of mortgage activity accounted for 49 percent of all applications.
“Mortgage application volume rebounded strongly in the week following the Memorial Day holiday, indicating that the holiday had a larger impact on business activity than originally assumed,” Mike Fratantoni, MBA’s chief economist, said in a statement.
“Comparing volume over the past two weeks, purchase activity is up over 6 percent, while refinance activity is down 5 percent. Strong job gains in May and initial signs of wage growth are supporting the purchase market.”