Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Higher Treasuries Prices Lead to Higher Mortgage Rates

By Rich Smith - Mar 27, 2014 at 7:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

New Fed Chairman's plan to begin raising rates in 2015 causes mortgage pain in 2014.

Freddie Mac released its weekly update on national mortgage rates on Thursday morning and, just as Freddie Mac vice president and chief economist Frank Nothaft predicted last week, rates are on the march back up.

Both 30-year fixed-rate mortgages (FRMs) and 15-year FRMs spiked sharply during the past seven days, with 30-year FRMs gaining eight basis points to reach 4.40%, and 15-year FRMs adding 10 b.p. to hit 3.42%. In both cases, these are the highest rates homebuyers have seen since mid-January.

As has been common so far this year, 5/1 adjustable-rate mortgage (ARM) rates followed the same tack as their longer-duration mortgage cousins, gaining eight basis points and returning to 3.10% -- the highest level since late January. Only one-year ARMs got cheaper, falling five b.p. to 2.44%.

Freddie Mac vice president and chief economist Frank Nothaft had warned last week that with interest rates on 10-year U.S. Treasuries rising, mortgage rates would likely move higher, as well. Today, he confirmed that thesis, blaming "the uptick on the 10-year Treasury note after comments by the Federal Reserve Board Chair Janet Yellen indicated a possible increase in interest rates as soon as early 2015." Adding to homebuyers' troubles, Nothaft noted that housing prices have gotten more expensive by 13.2% during the past year (through January). So in a nutshell, buyers face higher home prices -- and more expensive mortgages to pay for them.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.