Why Did the Rate on a 30-Year Fixed Rate Mortgage Rise Above 5 Percent This Week?
Back in March of this year, the Fed began buying long-term U.S. Treasury securities with a two-fold objective: a) increased demand for longer-term Treasuries would produce lower yields, which would in turn cause the rates associated with 15- and 30-year fixed-rate mortgages to decline, and b) lower yields would also stem the flow of capital to the safety of government debt by souring the Treasury security milk (the government would rather have capital moving to riskier investments like stocks and corporate debt, which would be much better for the economy.) For a while, it looked like the Fed got exactly what it wanted with regard to mortgage rates. According to the mortgage giant Freddie Mac, the average rate on a 30-year fixed-rate mortgage (FRM) was 5.47% on December 11, 2008. The average rate dropped below 5% during the winter and spring of this year, declining to 4.78% twice during April. But now rates may be starting to trend upward. On Thursday, Freddie announced that the average
