Mortgage rates rise with rollout of COVID-19 vaccines and stimulus measures

The 15-year fixed-rate mortgage, meanwhile, only rose seven basis points to an average of 2.23%. The 5-year Treasury-indexed variable rate hybrid mortgage was on average 3.12%, up 37 basis points from the previous week.

“As Treasury yields have risen, it puts pressure on mortgage rates to rise,” Sam Khater, chief economist at Freddie Mac, said in the report.

Historically, mortgage rates have roughly followed the direction of long-term bond yields, including the 10-year Treasury yield. Throughout the pandemic, this relationship has weakened from time to time, largely due to capacity restrictions in the mortgage industry.

Over the past week, the 10-year Treasury embarked on its longest streak of daily yield increases since 2017. Yields rose as investors expect President-elect Joe Biden and a controlled Congress. by Democrats are embracing additional stimulus amid the COVID-19 pandemic.

“The economy is currently still weak, but the incoming administration with congressional backing looks likely to issue significant additional stimulus, which will help offset the disruption in income and spending linked to the virus,” said Danielle Hale, Chief Economist of Realtor.com. In addition, the vaccines and the newly approved stimulus packages continue to unfold, giving consumers and investors a reason to expect brighter things this new year.

But “a prolonged upswing is far from inevitable,” warned Matthew Speakman, economist at Zillow ZG,
+ 1.33%.
Many have criticized the deployment of vaccines in the United States so far for being too slow, and concerns persist about whether the government stock will be sufficient in the long term.

Any major hiccups in lawmakers’ efforts to speed the country’s recovery from the pandemic could push rates down again.