Mortgage rates for 30-year loans skyrocketed to a 10-month high as investors reacted to Donald Trump's presidential election win by pulling money out of the bond market, driving up yields that guide home loans.
The average rate for a 30-year fixed mortgage was 3.94%,
Yields on 10-year Treasuries have jumped by more than 35 basis points since last week's election as investors wager that Trump's policies will spur faster growth and inflation. Traders are also betting with near certainty that the Federal Reserve will raise interest rates in December. Higher borrower costs will damage homebuyer affordability at a time of rising prices — though an improving job market may help to prop up housing demand.
"We were already expecting rates to go up anyway, and this is giving them more of a short-term boost," said Matthew Pointon, U.S. property economist for Capital Economics Ltd. "If the rise in interest rates is accompanied by higher earnings and banks relax lending standards, that will keep sales rising gradually over the next year."
Home-loan costs had been hovering near record lows, with the average 30-year mortgage rate sitting below 4% since the start of the year. With this week's jump, the monthly payment on a $300,000 loan has climbed to $1,422 from $1,354 at the start of November.
