Surging U.S. Treasury Yields Fuel Higher Mortgage Rates: Bank of America’s Adjustable Rates Exceed 8.00%

Mortgage rates have taken a sudden leap, with increases evident in both fixed-rate and adjustable-rate mortgages, because of a recent surge in short-term U.S. Treasury yields. Mortgage rates experienced an average increase of 10 basis points for fixed-rate mortgages, and an even steeper ascent, surpassing 15 basis points, for adjustable-rate mortgages.

These sudden rate shifts reflect the state of the mortgage market over the past week. The average 30-year mortgage rates have risen to 6.94 percent, up from the prior week's average rate of 6.83 percent, and 15-year mortgage rates are currently at 6.29 percent, up from last week's average rate of 6.18 percent. 5-year adjustable mortgage rates are currently at 7.35 percent, up sharply from last week's average rate of 7.18 percent.

Bank of America, one of the nation's leading banking institutions, increased adjustable mortgage rates to a new recent high. The bank's adjustable mortgage rates for 10-year, 7-year, and 5-year terms have all crossed the 8.00 percent threshold today, on the higher end of rates available right now.

Bank of America's 10-year adjustable-rate mortgage (10Y/6M ARM) is at 8.00 percent, with an annual percentage rate (APR) of 8.237 percent. 7-year ARM rates (7Y/6M) are at 7.625 percent, but with an APR that edges past 8.00 percent, at 8.001 percent. The 5-year ARM rates (5Y/6M), though set at a slightly lower 7.75 percent, have an APR of 8.09 percent.

The surge in adjustable mortgage rates at Bank of America reflects broader increase in interest rates in general, with the bank setting its rates well above the national average. These increases are, in part, a reaction to the performance of U.S. Treasury yields. When these yields climb, as they have done recently, it often exerts upward pressure on interest rates for a range of financial products, including mortgages.

If mortgage rates keep moving higher, the consequences for borrowers could be severe, making homeownership less affordable and possibly slowing down the housing market. Seeing short-term adjustable rates above 8.00 percent will definitely but a damper on the housing market.

Author: Brian McKay
August 4th, 2023

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