WASHINGTON (AP) — Average long-term U.S. mortgage rates rose sharply this week amid growing expectations that the Federal Reserve may soon raise its key short-term interest rate.
Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage jumped to 3.87 percent from 3.76 percent a week earlier. It was the largest weekly increase in the 30-year rate since June. The rate on 15-year fixed-rate mortgages advanced to 3.09 percent from 2.98 percent.
Still, rates remained historically low, marking a 15th straight week below 4 percent and well below last year's levels. A year ago, the average 30-year mortgage rate was 4.02 percent, while the rate for 15-year loans was 3.21 percent.
While keeping the key rate at a record low near zero, the Fed last week signaled the possibility of a rate hike in December. It was the first time in seven years of record-low rates that the Fed has explicitly raised the possibility that it could raise the benchmark rate at its next meeting.
At their mid-December meeting, Fed policymakers will consider raising the rate if the economy continues to grow at a strong enough pace to keep adding jobs and push annual inflation toward the 2 percent target, Fed Chair Janet Yellen told Congress on Wednesday.
A December rate hike seems more likely by the day. Stocks have recovered nearly all of their losses from the summer, financial markets have calmed in China and elsewhere, and the U.S. economy continues to slowly improve.
Market expectations of a rate increase have brought plunging government bond prices and soaring yields. The yield on the 10-year Treasury bond, which mortgage rates have been tracking, climbed to 2.22 percent Wednesday from 2.09 percent a week earlier. The yield was at 2.23 percent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage rose to 0.6 point from 0.5 point last week. The fee for a 15-year loan was unchanged at 0.6 point.
The average rate on five-year adjustable-rate mortgages jumped to 2.96 percent from 2.89 percent; the fee remained at 0.4 point. The average rate on one-year ARMs climbed to 2.62 percent from 2.54 percent; the fee held at 0.2 point.