Latest mortgage news: 30-year fixed rate nears 4.75%
With inflation raging at home and war roiling Europe, the average rate on 30-year mortgages surged to 4.73 percent this week from 4.59 percent last week, the highest level since late 2018, according to Bankrate’s national survey of large lenders.
The step-up comes as the Federal Reserve moved to raise rates, its first increase since 2018. That decision directly moves interest rates on some mortgage products, namely adjustable-rate mortgages and home equity loans. But central bank policy has fewer ramifications for fixed mortgage rates, which more closely follow 10-year Treasury yields.
“Inflation is still accelerating and until there is evidence that inflation is peaking, or has peaked, there isn’t much to keep mortgage rates from rising further,” says Greg McBride, Bankrate’s chief financial analyst.
A year ago, the benchmark 30-year fixed-rate mortgage was at 3.33 percent. Four weeks ago, the rate was 3.97 percent. The 30-year fixed-rate average for this week is 1.73 percentage point higher than the 52-week low of 3 percent.
The 30-year fixed mortgages in this week’s survey had an average total of 0.38 discount and origination points.
Over the past 52 weeks, the 30-year fixed has averaged 3.37 percent.
- The 15-year fixed-rate mortgage rose to 3.89 percent from 3.75 percent a week ago.
- The 5/1 adjustable-rate mortgage (ARM) rose to 4.23 percent from 3.86 percent (with the caveat that many lenders have shifted to the 5/6 ARM).
- The 30-year fixed-rate jumbo mortgage was 4.45 percent, up from 4.31 percent last week.
Where mortgage rates are headed
Mortgage experts who responded to Bankrate’s latest survey are mixed about whether rates will continue rising. Worries about runaway inflation are weighing on stocks and on U.S. Treasury yields, which this week climbed to 2.3 percent to their highest level in several years. The official inflation figure for February came in at 7.9 percent, its highest level in four decades and a harbinger of higher mortgage rates. Whether or not that path stands, the Fed has indicated it intends to raise rates several times in the coming months.
Tensions between Russia and Ukraine also have shaken financial markets, with mortgage rates briefly pushed down at the onset of the conflict.
As rates now near 5 percent, the refinancing boom of 2020 and 2021 seems all but over. Both rate-and-term and cash-out refinance activity were down in February to levels on par with 2019, according to Black Knight reporting, although cash-out refinances have remained strong as homeowners see their home values soar.
Meanwhile, the Federal Reserve began its long-anticipated “taper” of asset purchases, and the Fed has since said it might accelerate the pace of the taper. While that move creates upward pressure, mortgage rates are unlikely to spike as a result of the taper.
Home purchases remain strong for now
In a disconnect, home prices have been soaring even as mortgage rates rise. “Eventually mortgage rates will slow down home prices, but it hasn’t happened so far,” says Ken H. Johnson, a housing economist at Florida Atlantic University. “We should not see rapid upticks in prices as mortgage rates rise. It’s that kind of exuberance that led to past housing downturns.”
Economists had expected rates to rise by the end of 2022, but the surge in rates in the past two months has many forecasters wondering what comes next. As mortgage rates climb, decreased purchasing power might ease some of the pressure on home prices, but competition will remain intense among those who can afford to buy. Those looking to refinance should still be able to find good deals, though at rates a bit higher than the current level.
“There are two sides to rising rates,” says Skylar Olsen, principal economist at real estate technology firm Tomo. “Monthly affordability will take a hit, but we’ll also shake off more of the investor types looking for the leverage of a lifetime, so lifting rates could also mean a saner market. Rates that low caused all sorts of households to rush in, and without the supply to match, price growth has been violent. That stresses affordability too. The fundamentals of demographics, life and built-up savings will still push primary purchases forward. Less heat in housing is good.”
Source: https://www.bankrate.com/mortgages/analysis/