Joe Wilson's Silicon Valley Real Estate Blog

Tracking a rise in bond yields after President Obama agreed to extend tax cuts for two more years U.S. mortgage rates surged to a five- month high.

Freddie Mac said in a statement today that the average interest rate for a 30-year fixed loan rose from 4.46 percent to 4.61 percent this week for a fourth week of gains. Also, the average 15-year rate climbed from 3.81 percent to 3.96 percent.

Agreeing to extend tax cuts sent the yields on mortgage-bond securities to six-month highs on suspicion that the budget deficit could very well widen and accelerate inflation.

Paul Dales, U.S. economist at Capital Economics Ltd said, "Rising borrowing costs from record-low levels may spur some prospective homebuyers to make purchases to lock in low rates. Once people see this might actually be the bottom, they go for it."

Dales continued by saying, "It's still fair to say mortgage affordability is high and mortgage financing is cheap. It's just not as cheap as it was couple months ago."

The National Association of Realtors reported on December 2nd that pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October as low interest rates and reduced prices began to attract some buyers.