Rates this week surged to a six-month high. Though the yield on the benchmark 10-year bond has retreated some it has still increased 21 basis points this week.
Yields on Treasuries on 10 year bonds largely influence mortgage rates and borrowing costs for mortgages have suddenly gone up. The average rate for a 30-year fix loan increased to 4.6% in the week ended Thursday from 4.5% the previous week. The average 15 year rate rose to 3.9% from 3.8%. These rates are the highest since June.
Following a period of historically low mortgage rates and even though borrowing costs for new home loans are cheap, they haven't exactly spurred the kind of home buying that one would expect.
The Fed announced plans to begin buying up hundreds of billions of dollars in U.S. Treasuries. A rare and perhaps last ditch move intended to keep yields on Treasuries low to give the economy a needed jolt from the slow recovery through cheap credit.
How will homebuyers interpret the rising rates? Many believe that rates will force the fence sitters to jump into the market while others believe that with higher debt ratios and more down payment will keep the buyers grounded.
January 2011 will be a big indicator of which direction we are heading.
