Rates for home loans churned higher as investors braced for more interest rate increases and inflation quickened.
The benchmark 30-year fixed-rate mortgage averaged 4.43% during the week ending March 1, according to Freddie Mac's weekly survey, out Thursday. That was up three basis points from the prior week and leaves rates nearly half-a-percentage point higher than the level at which they started the year. The 15-year fixed-rate mortgage averaged 3.90%, up from 3.85%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.62%, down three basis points.
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As a new financial market reality sets in, mortgage rates are getting clobbered. Investors are selling bonds in anticipation of stronger inflation and more supply, and mortgages track the yield on the 10-year U.S. Treasury noteTMUBMUSD10Y, -1.24% . Bond yields rise as prices decline.
And testimony from the new Federal Reserve chair, Jerome Powell, only accelerated the bond selloff. In a session with the House of Representatives, Powell was more hawkish than most analysts had expected, and more investors now expect the central bank to hike rates four times this year, rather than just three.
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Yet housing demand is hanging tough. Data from the Mortgage Bankers Association shows that applications for mortgages to purchase a home are 6.7% higher for the first eight weeks of 2018 compared with the same period a year ago. Even applications to refinance have hung in: They were higher than last year every week up until the second half of February.
Higher mortgage rates always take a toll on the market, Freddie noted in a research note earlier in February. Americans take out fewer mortgages, home sales sink, and builders break ground on fewer homes.
But for now, Freddie and other industry participants think the groundswell of demand will offset the jump in rates, allowing the housing market to "post modest growth this year," the company said in a release.
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