Treasury Yields Push Today's Mortgage Rates Highest YTD

Mortgage rates climbed to 5.6% on 30-year fixed loans yesterday. The climb in rates came as yields on 10-year Treasuries reached their highest levels since last October. Rates on the 30-year fixed loans are up from 4.85% just three weeks ago.

Hope that mortgage rates will begin a climb down came yesterday afternoon as an increase in buyers of Treasury notes pushed yields back down to 3.94%. Banks offering home loans will be watching today's sale of 30-year bonds. A poor sale for the Treasury could signal further strains on the real estate market.

With mortgage rates on the rise and drops in new home and refinancing applications there are worries the thawing economy will cool back down. Lower interest rates equates to more consumer spending power. As more money is spent on home loans less money is available in family budgets to be spent elsewhere. At least for now, there seems to be a delay in this with retails sales rising 0.5% in May, though 0.6% had been predicted following rising sales in April.

The foreclosure filings hit 300,000 for the third consecutive month in May. These numbers come amongst in increase in refinancing applications earlier this spring as mortgage rates fell to record levels. With record jumps in rates this week, economists worry these numbers could grow, especially at Washington's deficit continues to grow.

Mortgage rates are tied heavily to Treasury yields and these yields are climbing higher by the week. As politicians in Washington released bills this week on a proposed overhaul of the U.S. health care system fears of compounding deficits are hampering economic recovery. Earlier this week Russia announced it was considering reducing its holdings of U.S. bonds and exchange them for IMF bonds. With growing deficits and growing concern from investors abroad, the U.S. market could be in for a rude awakening with yet higher mortgage rates.