Average 30-Year Mortgage Rate Hits 4.47% (Not Counting Fees); Affordability Check

USA Today reports Average 30-year mortgage rate moves up to 4.47%

Mortgage buyer Freddie Mac said Thursday the rate on the 30-year loan increased to 4.47% from 4.42% last week. The average on the 15-year fixed loan rose to 3.51% from 3.43%.

A government report issued Wednesday showed that U.S. builders broke ground on homes in November at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating despite higher mortgage rates.

Data from the National Association of Realtors released Thursday showed the number of people who bought existing homes last month declined for the third straight month as higher mortgage rates made home-buying more expensive.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through 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% of the loan amount.

The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan declined to 0.6 point from 0.7 point.

Bankrate 30-Year Fixed Mortgages



Chart courtesy of bankrate.

10-Year Treasury Yield



Mortgage rates tend to follow the yield on 10-year treasuries. At 2.984% the 10-year treasury yield is as high as any time since mid-2011. Since mid-2012 the 10-year treasury yield is up from 1.394% in mid-2012, a rise of 159 basis points (1.59 percentage points).

Affordability Check

In December 2012, the 30-year fixed rate mortgage was 3.4% Today it is 4.52%, a rise of 1.12 percentage points.

Housing analysts point out that rates are low on a historical perspective, and they are correct. Nonetheless, a one percentage point rise in rates affects affordability by 10-11%.

Recall that a record number of Millennials, adults aged 18 to 32, put off household formation and stay at home to live with parents. See Kids Living in Basements a Drag on U.S. Services Spending

Each uptick in mortgage rates, even near "historic low rates", discourages household formation.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com