US mortgage rates soared last week amid a sharp rise in Treasury market yields, as investors started to bet that inflation pressures could prompt the Federal Reserve to raise interest rates this year.

The sell-off pushed rates on 30-year fixed-rate mortgages to an 11-week high of 6.02 per cent, against 5.81% a week earlier, according to Meanwhile, the so-called “jumbo” mortgages – or those for loans above $417,000 (£211,000) – rose to 7.21% from 7.05%.

This means the borrowing rates on many home loans in expensive areas such as California, Florida and New York are running at heights last seen in mid-April – or just before the government-backed mortgage financiers Fannie Mae and Freddie Mac began buying jumbo loans in a bid to support the market.

The surge in mortgage rates will make it more expensive to buy homes and less likely that homeowners will be able to refinance mortgages.

That is likely to damp hopes of an early recovery in the US housing market.

Financial Times