NEW YORK – The days of the absurdly low mortgage rate are over.
The average rate for a 30-year home loan rose above 5 percent this week for the first time since last April – just as Americans are feeling more secure in their jobs and confident about the economy, and just before the big spring home-buying rush.
Freddie Mac said Thursday that the average rate was 5.05 percent, almost a full percentage point higher than in November, when it hit a 40-year low.
Economic signals suggest the recovery is gaining momentum. New claims for jobless benefits came in this week at the lowest in three years, and the unemployment rate has fallen nearly a full percentage point in two months. Americans are spending more and saving less.
Now rates are rising, and analysts expect that will continue through the end of the year, to about 5.5 percent. The next few months are the busiest for the housing market – about one in three home sales happens in the spring.
Rates have been rising since the fall, mostly because of fears that higher inflation is coming. Investors have been demanding higher yields on Treasury bonds ever since the Federal Reserve announced its program to pump up the economy by spending $600 billion to buy government debt. Mortgage rates tend to track the yield on the 10-year Treasury note.
Mortgage rates are still extremely low by historical standards. Anyone who bought a house 30 years ago might remember paying 18 percent on their loan.