The US 30-year mortgage rate climbs above 3% for the first time since July as Treasury yields rise

• The average 30-year fixed mortgage rate rose to 3.02% from 2.97% this week, Freddie Mac said Thursday.
• The reading marks the first time the rate stood above 3% since July. Rates have now held steady or increased for five weeks straight.
• Mortgage rates typically move in tandem with the 10-year Treasury yield, and optimism toward the US recovery has recently led investors to dump government bonds and send yields soaring.
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After setting more than 15 record lows since the start of the pandemic, the benchmark mortgage rate is finally rebounding.

The average 30-year fixed mortgage rate rose to 3.02% this week from 2.97%, mortgage-finance giant Freddie Mac said Thursday. The reading marks the first time the rate has landed above 3% since July. The rate has now increased or held steady for five weeks straight, signaling the low borrowing costs that fueled the housing market's boom are reversing.

The 15-year fixed mortgage rate averaged 2.34%, holding steady from last week's reading. The 5-year Treasury-indexed hybrid adjustable rate averaged 2.73%, down from 2.99%.

Mortgage rates began to plummet in spring 2020 as the pandemic first hit the US economy. The Federal Reserve's move to cut interest rates to zero dragged borrowing costs lower, and follow-up guidance hinting at years of ultra-easy monetary conditions kept mortgage rates tumbling.

The downtrend helped set the housing market apart from the rest of the economy. Homebuying activity surged as Americans took advantage of low rates and new work-from-home mandates. Supply immediately struggled to keep up with historic demand, leading home prices to steadily climb.

That buying spree could soon ease up as mortgages get more expensive, according to Freddie Mac.

"While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic," Sam Khater, chief economist at Freddie Mac, said in a statement. "However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season."

The recent uptick in home-loan rates comes as Treasury yields surge to their highest levels since the start of the pandemic. Investors dumped government bonds over the last two weeks in anticipation of new stimulus and reopening to fuel stronger inflation. Mortgage rates typically move in tandem with the 10-year Treasury yield, meaning growing optimism toward the US recovery stands to lift rates further.

The Treasury market got its latest jolt Friday morning when data detailing job growth in February surprised to the upside. The US economy added 379,000 nonfarm payrolls last month, smashing the median estimate of 200,000 additions. The unemployment rate fell to 6.2% from 6.3%.

The encouraging trend immediately drove selling in the Treasury market. The 10-year yield rose to 1.626%, its highest level in more than a year.