Many homeowners and mortgage companies know that mortgage rates increased last week despite America’s recovering economy. Although a weak economy doesn’t seem like a favorable environment for increasing mortgage rates, this isn’t necessarily the case. Factors such as an increase in yields on government bonds can spike mortgage rates, regardless of the current economic status. Mortgage-backed securities are constantly in competition with Treasury bonds for investor’s money, which can greatly affect rates.
In late April, the Standard & Poor’s/Case-Shiller Home Price Index showed that mortgage rates in 20 of the largest U.S. cities increased by about one percent from January to February. The report also states that these cities increased their rates by five percent year over year.
Although mortgage rates recently grew, many mortgage companies understand that this trend is unlikely to continue over time due to recent weak economic growth. For example, the Federal Reserve recently stated that the economy is struggling due to “transitory factors,” and it is unlikely to raise rates until inflation meets its two percent goal. Due to this fact, another rate hike in the near future seems unlikely, though the Fed has hinted another rate hike could happen in September.
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