By Canadian Press

Mortgage rates leap to 7-year highs; 30-year at 4.90 per cent

Oct 11, 2018 | 9:45 AM

WASHINGTON — Long-term U.S. mortgage rates leaped this week to their highest levels in seven years amid global anxiety over rising interest rates that has gripped financial markets.

Costs for would-be homebuyers are climbing. Mortgage buyer Freddie Mac said Thursday the rate on 30-year, fixed-rate mortgages jumped to an average 4.90 per cent this week from 4.71 per cent last week. That’s the highest level for the benchmark rate since April 2011. A year ago, it stood at 3.91 per cent.

The average rate on 15-year, fixed-rate loans rose to 4.29 per cent this week from 4.15 per cent last week.

The Federal Reserve recently signalled its confidence in the economy by raising a key interest rate for a third time this year, forecasting another rate hike before year’s end.

It was the central bank’s third increase in short-term interest rates this year, with one more expected before year’s end. Strong economic data and a positive outlook from Fed officials have spurred a sell-off in U.S. Treasury bonds, especially longer-term bonds, stoking concerns over even higher interest rates.

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As anxiety over higher rates spiraled, financial markets around the world suffered a massive sell-off. U.S. stocks marked their biggest drop since February on Wednesday, as the Dow Jones industrial average slid 831 points. Stocks sank again on Wall Street on Thursday morning.

President Donald Trump stepped in to assert that the Fed “is making a mistake” with its rate increases and accused the central bank of having “gone crazy.”

Interest rates on Treasury bonds have climbed to the highest levels in seven years as their prices have dropped. The yield on the key 10-year Treasury note, which tends to influence mortgage rates, was at 3.16 per cent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates.

The average fee on 30-year fixed-rate mortgages rose to 0.5 point from 0.4 point last week. The fee on 15-year mortgages also increased to 0.5 point from 0.4 point.

The average rate for five-year adjustable-rate mortgages jumped to 4.07 per cent from 4.01 per cent last week. The fee was unchanged at 0.3 point.

The Associated Press