Mortgage rates climbed this week, despite forecasts they would fall with federal interest rate cuts made to stave off some economic fallout from the coronavirus pandemic.
The average 30-year rate on a home loan climbed to 3.65% after hitting a record low 3.29% two weeks ago, according to federal mortgage giant Freddie Mac. This week’s increase was the biggest since late 2016.
Mortgage rates below 4% have been spurring homebuying during the past year.
Market watchers thought the Feds announcements Sunday to cut interest rates to 0% and begin purchasing $200 billion in mortgage-backed bonds would help keep home loan rates down.
Dean Wegner, branch manager of Guardian Mortgage of Scottsdale, said when the overall cost of borrowing is reduced it typically is reflected in mortgage rates, but not necessarily right away.
Mortgages are long-term loans with rates that typically follow bond yields, instead of short-term interest rates like the one the Feds lowered from 1% to about 0%.
Rates on mortgages climbed after Congress approved a big spending package to help with the economic fallout from the coronavirus.
“Mortgage rates jumped sharply this week, as volatile swings in stock markets, government spending to help cushion the growing fallout from the coronavirus crisis and underlying stresses in the broader markets weakened demand for government debt,” said Zillow economist Matthew Speakman.
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