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Strong Jobs Report Lifts Mortgage Rates

Average 30-year fixed rate 4.04%

June 11, 2015

By E. SCOTT RECKARD Los Angeles Times - Tribune News Service

The average interest rate that lenders offered on 30-year home loans shot back above 4 percent this week for the first time since November, pushed by news of a strengthening economy.

Freddie Mac's widely followed weekly survey, released early Thursday, showed the 30-year mortgage at an average interest rate of 4.04 percent, up from 3.87 percent a week ago.

The average for a 15-year mortgage rose from 3.08 percent to 3.25 percent, and the start rate for an adjustable-rate loan with a fixed rate for the first five years was 3.01 percent, up from 2.96 percent.

The rates rose as investors, reacting to a robust report on jobs, dumped conservative government bond investments and piled into stocks, with the Dow Jones and other indexes adding well over 1 percent on Wednesday. The Dow, Nasdaq and S&P 500 indexes continued to rise Thursday morning.

Mortgages tend to track the yield on the benchmark 10-year Treasury security, which has risen from a recent low of 2.1 percent in late May to nearly 2.5 percent on Wednesday.

Investors require higher interest rates on government and mortgage bonds as demand for fixed-income securities wanes and expectations for inflation rise.

The trend is pulling mortgage rates along with it.

"Markets are responding to strong employment data," Freddie Mac deputy chief economist Len Kiefer said in announcing the weekly survey.

"In May, the U.S. economy added 280,000 jobs," he said. "Moreover, job openings surged to 5.4 million in April, up over 20 percent from a year ago."

The survey asks lenders each Monday through Wednesday morning about the terms they are offering to solid borrowers seeking mortgages of up to $417,000 that conform to the guidelines of Freddie Mac and Fannie Mae, the nation's major mortgage financing companies.

The borrowers would have paid a little more than half of 1 percent of the loan balance in upfront lender fees and discount points to obtain the fixed rates. Payments for such services as appraisals and title insurance are not included.

The survey provides a consistent gauge of mortgage trends, but actual rates adjust constantly and are influenced by many factors. Those include borrowers' credit histories and debt loads and whether they opt for zero-cost loans at higher rates or pay extra points to lenders initially to further lower the rates.

At the Mortgage Grader brokerage in Laguna Niguel, broker Jeff Lazerson was quoting a 30-year rate of 3.875 percent Thursday morning to solid borrowers who paid him 1 percent of the loan amount upfront.

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