Fixed Mortgage Rates Rise as Treasury Bond Buying Program Ends

Fixed mortgage rates increased again this week, the most in four months. The average rate on the 30-year loan, 4.51 percent last week, is up to 4.60 percent, according to Freddie Mac. Three weeks ago it sat at 4.49 percent, the lowest it has been in 2011.

The 15-year fixed mortgage's average rate rose to 3.75 percent after bottoming out at 3.67 percent two weeks back. The 15-year fixed is a popular refinancing choice for homeowners.

The average rate of a five-year adjustable-rate mortgage jumped from 3.25 to 3.30 percent this week. That 3.25 percent last week was the lowest rate since 2005. Likewise, the average rate on a one-year adjustable-rate loan increased from 2.95 to 3.01 percent.

The good news however, is that the rate changes are not irrational or a sign of some inherent market weakness. Rates generally correlate with the yield on the 10-year Treasury note, which has been on the uptick for several weeks. The Fed had been purchasing $75 billion worth of bonds monthly since November '10. That dropped the yield on the 10-year Treasury note below 3 percent this spring, in turn lowering the rates on mortgages and other loans.

With that $600 billion bond buying program finish, mortgage rates could continue to rise in the short-term.