Rising Treasury yields lifts mortgage rates off the bottom

After the 30-year fixed mortgage rate hit an historical low of 4.17% three weeks ago, rates have been edging higher, rising by 6 basis points to 4.46% in the week ended December 2, according the the latest survey by Freddie Mac.

The culprit: the rise in the yield of the ten year-Treasury bond.



Mortgage rates have been in a consistent downward trend for much of the year thanks to the summer slowdown in the economy and the near absence of inflation expectations for much of the summer.

Talk the Fed would eventually embark on a new round of quantitative easing also had a temporary impact, pushing down Treasury yields.  But rising inflation expectations, also the result of the new bond buys, coupled with profit-taking in the bond market and renewed strength in the economy, has pushed yields on government bonds higher.

Mortgage rates, which track the 10-year yield closely, have reacted accordingly, rising off the bottom.

Impact on housing should be negligible. Any favorable tailwind from the drop in the 30-year rate to just above 4% (and below 4% for the 15-year fixed mortgage) has been offset by a myriad of worries that have kept many potential buyers on the sidelines.

Besides, mortgage rates are still very attractive.