Average US rate on 30-year mortgages rises to 3.97 percent

WASHINGTON (AP) — Average long-term U.S. mortgage rates rose slightly this week in the days before the Federal Reserve announced a historic increase in its key short-term interest rate.

Mortgage buyer Freddie Mac said today the average rate on a 30-year fixed-rate mortgage edged up to 3.97 percent from 3.95 percent a week earlier. The average rate on 15-year fixed-rate mortgages increased to 3.22 percent from 3.19 percent.

The key 30-year rate is well above its level of a year ago, 3.80 percent. The rate has increased significantly overall since the end of October, when it stood at 3.76 percent. But it remains historically low at below 4 percent.

The Fed announced Wednesday a quarter-point increase in its benchmark funds rate, to a range of 0.25 percent to 0.5 percent. It was the Fed's first rate hike in nine years. The Fed policymakers coupled the hike with a signal that further increases likely will be made slowly, as the economy strengthens further and inflation rises from undesirably low levels.

The Fed's move isn't likely to drive a jump in the rates that people pay for mortgages anytime soon. The Fed's funds rate — the rate that banks charge each other on overnight loans — has limited influence on home borrowing rates.

The yield on the 10-year Treasury bond, which mortgage rates have been tracking, rose to 2.30 percent Wednesday from 2.21 percent a week earlier. Yields on the U.S. government bonds move in the opposite direction of the bonds' prices. The yield fell to 2.25 percent this morning.