NEW YORK (Reuters) - U.S. mortgage rates fell in the latest week even as bond yields rose on upbeat U.S. economic data and Federal Reserve Chair Janet Yellen’s hint of a possible faster pace of interest rate increases, according to mortgage finance agency Freddie Mac (FMCC.PK) on Thursday.
The borrowing cost on 30-year mortgages, the most widely held type of U.S. home loan, averaged 4.15 percent in the week ended Feb. 16, down from 4.17 percent the previous week, Freddie Mac said.
The 30-year mortgage rate has held below its two-plus year high of 4.32 percent set in late December.
Average interest rates on 15-year fixed-rate and five-year adjustable rate home loans fell 4 basis points and 3 basis points, respectively, from the prior week.
The benchmark 10-year Treasury yield US10YT=RR was 2.452 percent on Thursday, up 4 basis points so far this week after last week’s 8 basis-point decline, according to Reuters data.
Fed Chair Yellen during her testimony before Congress on Tuesday and Wednesday hinted a faster pace of rate increases may be needed if the job market improves further and inflation reaches the Fed’s 2 percent goal.
Her remarks on rate hikes came as data on Wednesday showed retail sales rose faster than forecast in January and consumer prices posted their biggest monthly increase in nearly four years.
“For the last 46 years, the 30-year mortgage rate has been almost perfectly correlated with the yield on the 10-year Treasury, but not this year,” Freddie Mac chief economist Sean Becketti said in a statement. “While we expect mortgage rates to fall into line with Treasury yields shortly, this just may be a year full of surprises.”
Mortgage rates have scaled back from their spike following Donald Trump’s U.S. presidential win in November, helping to stabilize demand for mortgages.
The pullback in home financing costs should also support home sales and construction in the coming months.
Earlier on Thursday, data showed housing starts fell 2.6 percent in January but building permits reached a one-year high.
Below is a summary of Freddie Mac’s average mortgage rates in the week ended Feb. 16:
Loan type Latest week (pct) Week ago (pct) Year ago (pct)
30-year fixed 4.15 4.17 3.65
15-year fixed 3.35 3.39 2.95
5-year ARM 3.18 3.21 2.85
Reporting by Richard Leong; Editing by Meredith Mazzilli