Business

Unwelcome Christmas present: rise in interest rates

It's the financial-market equivalent of a lump of coal.

Interest rates are steadily inching up, with the yield on the benchmark 10-year Treasury note brushing up against 3% on Thursday morning.

The movement in Treasury rates portends a potential rise in mortgage rates in the new year.

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Though mortgage rates remain low by historical standards, the 10-year Treasury note, a benchmark for mortgage rates, is at its highest level since early September.

As of 10 a.m. PST, the Treasury yield was 2.99%.

The jump in rates is another sign that the U.S. economy is expected to grow solidly in 2014.

The stock market continued its stunning yearlong climb, with the Dow Jones industrial average advancing nearly 100 points.

It recently was up 93.29 points, or 0.6%, to 16,450.84.

Rising long-term interest rates can raise costs for consumers seeking to finance home purchases and other long-term debt.

Lenders were offering the 30-year fixed-rate mortgage early this week at an average of 4.48%, little changed from 4.47% a week earlier, according to the widely watched Freddie Mac survey. The weekly report, released Thursday, said the average rate for 15-year fixed-rate home loans also was little changed at 3.52% compared to 3.51% a week ago.

The rate on the 30-year fixed loan, the most popular type of mortgage, is more than a percentage point higher than a year ago and at its highest level in more than three months.

The increase has choked off a boom in homeowners refinancing their properties but remains a great deal for buyers by historical standards: 30-year mortgage rates were in the double digits for most of the 1980s and remained above 7% for most of the 1990s.

Freddie Mac asks lenders early each week about the terms they are offering to solid borrowers with 20% down payments or equivalent home equity if they are refinancing. The borrowers would have paid 0.7% of the loan amount in upfront lender fees and points to obtain this week’s rates, the McLean, Va., home finance giant said.

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Follow Walter Hamilton on Twitter @LATwalter

Copyright © 2014, Los Angeles Times
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