Originally published by Barron’s | January 14, 2021
Mortgage rates typically rise and fall alongside the 10-year Treasury yield since both are influenced by investor activity in the bond market.
Mortgage rates increased this week from their historic low. Home buyers and owners looking to refinance shouldn’t expect them to go back down.
Bond yields, which have been increasing steadily since mid-August on hopes for further stimulus and optimism that the economy will rebound once a vaccine is distributed, rose swiftly in the new year, with the benchmark 10-year Treasury yield climbing 22 basis points (one-hundredth of a percentage point) to close as high as 1.15% this week.
That could be an indicator that ultralow mortgage rates—which generally move with the 10-year Treasury yield—have reached their bottom. Mortgage rates ticked up this week to 2.79% from 2.65% the week prior, Freddie Mac reported Thursday. “As Treasury yields have risen, it is putting pressure on mortgage rates to move up,” Sam Khater, Freddie Mac’s chief economist, said.
“The absolute low in mortgage rates is likely to be over. Expect a slight upward nudge to mortgage rates in the upcoming months.”
—Lawrence Yun, chief economist at the National Association of Realtors
Mortgage rates typically rise and fall alongside the 10-year Treasury yield since both are influenced by investor activity in the bond market. Both mortgage rates and Treasury yields fell to new lows or near all-time lows during the pandemic, with the 30-year fixed mortgage rate averaging about 2.83% in the past six months, according to Freddie Mac data, and the 10-year Treasury yield averaging 0.78%, according to data from the Board of Governors of the Federal Reserve System.