Mortgage rates jump because of bond market weakness

Mortgage rates are going up again, reversing the trend of improving housing affordability - Image (c) ConsumerAffairs

The change has reversed the trend toward improving housing affordability

Freddie Mac reports its Primary Mortgage Market Survey shows a surge in the 30-year fixed-rate mortgage, which this week averages 6.32%. 

“Following the release of a stronger-than-expected September jobs report, the 30-year fixed rate mortgage saw the largest one-week increase since April,” said Sam Khater, Freddie Mac’s chief economist. 

“However, we should remember that the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year. Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market.”

Mortgage rates are tied to the yield on the Treasury’s 10-year bond. That yield surpassed 4% this week for the first time since the spring. Yields are rising because the government is having to pay higher rates to sell bonds.

After dropping to a low of 6.09% two weeks ago, the rise in mortgage rates will reverse what had been an improvement in housing affordability.