Long-term mortgage rates fall, breaking 9-week rise

That would depress prices of long-term Treasury bonds because inflation would erode their value over time, a prospect that caused investors to demand higher yields. The wave of selling in the bond market lifted bond yields, which move opposite to prices and influence long-term mortgage rates. Yields reached their highest levels in more than two years.

This week, bond prices recovered and the yield on the benchmark 10-year Treasury bond fell to 2.44 per cent Wednesday from 2.51 per cent a week earlier. That compares with 1.87 per cent on Election Day Nov. 8. The yield declined further to 2.42 per cent Thursday morning.

The sustained climb in mortgage rates caused fewer consumers to come forward to buy a home. Applications for mortgage loans dropped 12 per cent in the week ended Dec. 30 from two weeks earlier, according to the Mortgage Bankers Association. Applications to refinance mortgages dropped 22 per cent.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday 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 per cent of the loan amount.

The average fee for a 30-year mortgage was unchanged this week at 0.5 point. The fee on 15-year loans also remained at 0.5 point.

Rates on adjustable five-year loans rose to 3.33 per cent from 3.30 per cent. The fee fell to 0.4 point from 0.5 point.

The Associated Press

by Canadian Press

Long-term mortgage rates fall, breaking 9-week rise

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