Mortgage rates for 30-year loans rose to a seven-week high, increasing borrowing costs from close to historic lows.
The average rate for a 30-year fixed mortgage was 3.76%, up from 3.69% last week, Freddie Mac said in a statement Thursday, while the average 15-year rate climbed to 3.05% from 2.99% percent.
An improving U.S. job market is leading to speculation that the Federal Reserve will raise interest rates, while the European Central Bank’s embracing of monetary stimulus has pushed up yields for the government bonds that guide mortgages. Borrowing costs are still low, considering the 30-year rate averaged about 6% over the last two decades.
“Rates have been freakishly low, so they’re now looking more normal, not less,” Nela Richardson, chief economist for Seattle-based property-data provider Redfin Corp., said in a telephone interview Wednesday. “Still, I think rates will stay low through 2015. There’s no risk of them going above 5%, and thats good news for homeowners this year.”
Housing demand remains uneven even with an improved job market. Single-family housing starts declined 2% to a 1.07 million annual rate in January as demand cooled from an almost seven-year high, the Commerce Department said Wednesday.
Mortgage applications decreased 13% in the week ended Feb. 13, according to the Mortgage Bankers Association. The refinancing portion of the mortgage market fell to 66% of total applications from 69% the previous week.