Mortgage rates rise above 3 percent

Mortgage rates have moved up, with the average rate for a 30-year fixed-rate mortgage surpassing 3 percent for the first time since

June, according a weekly survey by the government-sponsored mortgage company Freddie Mac.

The move, according to economists, is a sign that the economy’s recovery is expected to continue.

In the week ending Sept. 30, the average rate for a 30-year fixed-rate mortgage was 3.01 percent, up from 2.88 percent the week before; the average rate for a 15-year fixed-rate mortgage rose to 2.28 percent, up from 2.15 percent the week before.

“These increases were caused by the recognition that the economy is doing well and that growth will likely continue,” said Danielle Hale, chief economist at the real estate listing site Realtor.com.

The improvement in the economy, meanwhile, is leading the Federal Reserve to scale back its purchases of government bonds and mortgage-backed securities, a policy aimed at lowering longterm interest rates. The planned reduction in bond purchases has contributed to a sharp rise in yields of the 10-year Treasury, to which mortgage rates are tied.

The yield on the 10-year, which dropped comfortably below 1 percent during the pandemic, has risen above 1.5 percent. That’s still historically low.

When there is a large demand to buy mortgage debt — such as the demand created by the federal government buying tens of billions of dollars worth of mortgage-backed securities — competing buyers become willing to accept lower yields, driving down the interest paid on bonds and mortgages.

But the return of a more normal mortgage market means that one of the pandemic’s silver linings for homebuyers — record low mortgage rates that partially offset rapidly rising prices — will begin to ebb.

“At today’s rate, the monthly mortgage payment on a medianpriced home for-sale is roughly $150 higher than it was a year ago with $25 of the increased owed to higher rates and $125 owed to higher home prices,” Hale said.