In a sign that the days of ultra-low mortgage rates may be ending, Freddie Mac’s weekly Primary Mortgage Market Survey, revealed that rates continue to harden, and have been doing so for three weeks.

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The 30-year fixed rate mortgage rose to an average 3.62 percent, from 3.59 percent last week. Similarly, the 15-year fixed rate mortgage was average 2.88 percent, up from 2.84 percent last week.

Mortgage rates have started hardening and the trend caught attention in March and then again in June. It appears that the low borrowing rates helped beleaguered home owners to refinance their existing rates, and thereby reduce the monthly loan outgo on their mortgages. This helped stabilize the housing market conditions, leading to more people gathering confidence to think of new deals. The news of upticking mortgage rates also encouraged fence-sitters to take the plunge, as fearing a change in interest rate trend, they decided to go for the new property. All this has resulted in better tidings for the housing industry, and in turn for the economy. The trickle-down effect can also be witnessed in the jobs market as employment improves, which again boosts the housing market. And so the cycle continues.

Here is a telling comment from Frank Nothaft, Freddie Mac vice president and chief economist:

“The latest economic indicators point toward low inflation but gradually stronger economic activity, which placed further upward pressure on long-term Treasury yields, and in turn, fixed mortgage rates. For example, inflation remains in check with 12-month growth in the core consumer price index falling for a second month to 2.1 percent in July. At the same time, industrial production rose 0.6 percent in July, compared to a 0.1 percent increase in June, and retail sales jumped 0.8 percent in July from a 0.7 percent decline in June.”

The improving economy actually encourages investors who have sought refuge in the safety of Treasury Bonds to sell their holdings, causing a pressure on the prices of these bonds. A cheaper bond means that the yield on its investment is higher, a signal that interest rates have hardened. It may be noted the yield on the 10-year Treasury note reached a low of 1.4 percent on July 24, and is currently 1.8 percent. Rising treasury yields are followed by rising mortgage rates, which in turn depresses housing demand. This creates a self fulfilling cycle and a catch-22 for the struggling housing market.

These are conflicting, but real chain reactions that run through any economy. Here in the U.S., they are more significant, given the collapse in the housing market from 2008, and the concern on whether the economy is in the middle of a real recovery.