U.S. mortgage rates climbed, increasing borrowing costs as rising home prices add to household wealth.
The average rate for a 30-year fixed mortgage was 3.42 percent in the week ended today, up from 3.38 percent and the highest since September, McLean, Virginia-based Freddie Mac said in a statement. The average 15-year rate rose to 2.71 percent from 2.66 percent.
Home prices are increasing across the country as low interest rates and improving employment boost demand. Higher values support consumer spending by giving homeowners the perception that they have a stronger household balance sheet and by allowing them to refinance into lower-cost mortgages, Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said in a note yesterday.
“Even small moves in home prices can have large effects on consumption, because housing comprises such a significant share of household assets,” LaVorgna wrote.
U.S. house prices rose 5.6 percent in the 12 months through November, according to data released yesterday by the Federal Housing Finance Agency.
Sales of existing homes dropped 1 percent in December, restrained by a tight inventory of available properties, while the median price jumped 12 percent from a year earlier to $180,800, figures from the National Association of Realtors showed this week. The 4.65 million homes sold last year was the most since 2007, the group said.
A measure of refinancing applications increased 7.7 percent in the week ended Jan. 18, the Washington-based Mortgage Bankers Association said yesterday. The group’s purchase index climbed 2.5 percent.
The average 30-year mortgage rate dropped to a record 3.31 percent in November, according to Freddie Mac. (FMCC:US) The 15-year rate fell to 2.63 percent, also the lowest on record.
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