As those hoping to buy a home this summer are painfully aware, mortgage rates have shot up a lot.
The average rate for a 30-year fixed-rate mortgage started off the year at a little over 3%. It's now surpassed 5%. But the Federal Reserve has only raised short-term rates once in the post-pandemic recovery — last month at one quarter of a percent. So why are mortgage rates being pushed up so much higher and faster?
"Everyone is trying to figure that out," said Carol Schleif, a Minneapolis-based investment officer with BMO.
One reason is that rates for mortgages as well as student loans, which are much longer-term kinds of debt, tend to more closely follow the market for 10-year U.S. Treasury notes.
"The Treasury market moved really rapidly to readjust to a much more hawkish Fed starting in January and February," Schleif said.
That's when Fed officials began talking more aggressively about tightening monetary policy, with more interest rates hikes this year as well as tapering its asset purchasing.
The long-term market doesn't wait for those changes to be enacted, said Greg McBride, chief financial analyst for Bankrate.com. It "tends to move well in advance of them," he said.
Rate hikes over the course of the loan are often taken into account in mortgage rates. "If you're going to invest money over 10 years, you need to look at what interest rates are going to be over the course of those 10 years, not just the next six to 12 months," McBride said.