Mortgage rates continued to climb this week, reaching highs not seen since April.

According to the latest data, released Thursday by Freddie Mac, the 30-year fixed-rate average rose to 3.14% with an average 0.7 point. (Points are fees paid to a lender equal to 1% of the loan amount. They are in addition to the interest rate.) The 30-year fixed average was 3.09% a week ago and 2.81% a year ago. The 30-year fixed average has increased 15 basis points in the past three weeks. (A basis point is 0.01 percentage point.)

Freddie Mac, the federally chartered mortgage investor, aggregates rates from some 80 lenders across the country to come up with weekly national averages. The survey is based on home purchase mortgages. Rates for refinancings may be different. The survey uses rates for high-quality borrowers with strong credit scores who make large down payments. Because of the criteria, these rates are not available to all borrowers.

The 15-year fixed-rate average rose to 2.37%, with an average 0.7 point. It was 2.33% a week ago and 2.32% a year ago. The five-year adjustable rate average ticked up to 2.56% with an average 0.3 point. It was 2.54% a week ago and 2.88% a year ago.

“Mortgage rates continued their steady march upward last week, reaching their highest levels since April,” said Paul Thomas, vice president for capital markets at Zillow. “Consumer confidence is improving and inflation expectations increasing with continued economic recovery, while jobless claims data showed further improvement in labor markets. Bond investors have priced in higher inflation expectations recently.”

The yield on the 10-year Treasury traded above 1.68% last week but has pulled back recently. It closed at 1.54% on Wednesday. Mortgage rates tend to follow the same path as long-term bond yields. When bond yields rise, rates tend to follow.

“Last week, we didn’t even come close to testing 1.75% on the 10-year yield, and bond yields fell from last week,” said Logan Mohtashami, housing analyst at HousingWire. “While the 2-year yield is really getting some traction with higher yields, the 10-year yield headed lower the last few days. Pricing should get better, even as the economic data is still expansionary. The 10-year yield has had a hard time getting over 1.94% post-August 2019.”

The Federal Reserve meets next week, and nearly everyone expects it to announce it will begin winding down, or tapering off, its bond-buying program. The Fed has bought $120 billion of Treasurys and mortgage-backed securities since the beginning of the pandemic, which has kept mortgage rates low. Once it removes that support, rates are expected to rise. But by how much remains to be seen. One reason for the recent run-up in rates is that the central bank has been signaling its intentions and investors have reacted.

“Next week’s Federal Reserve [Federal Open Market Committee] meeting to decide on the next monetary steps will offer more clarity to financial markets about the road ahead,” said George Ratiu, an economist at Realtor.com. “With the Fed expected to announce a tapering of its asset purchases in light of stronger employment and higher inflation, I expect rates to continue rising.”

But Bankrate.com, which puts out a weekly mortgage rate trend index, found nearly half of the experts it surveyed expected rates to go down in the coming week.

“Mortgage bonds have been improving the last few days, just ahead of the next Fed meeting next week,” said Elizabeth Rose, a certified mortgage planner at Mortgage300. “But later this week, we get inflation data as well as GDP figures, which has the potential to move the market.”

Meanwhile, mortgage applications were flat last week. According to the latest data from the Mortgage Bankers Association, the market composite index – a measure of total loan application volume – was 0.3% higher than a week earlier. The purchase index increased 4%, but the refinance index fell 2%. The refinance share of mortgage activity accounted for 62.2% of applications.

“The housing market this fall has been a tale of steady home-purchase activity, rising mortgage rates, falling refinance applications, and increasing loan balances,” said Bob Broeksmit, president and chief executive of the Mortgage Bankers Association. “Applications to buy a home bounced back last week but remained lower than year-ago levels, as low inventory and swift home-price appreciation continue to hold back some would-be buyers. Mortgage rates increased for the fifth straight week to an eight-month high and led to a retreat in refinances to the lowest level since January 2020.”


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