Average long-term US mortgage rose again this week to highest level since mid December
LOS ANGELES (AP) — The average long-term U.S. mortgage rate rose this week for the third time in as many weeks, driving up home loan borrowing costs in just as the spring homebuying season ramps up.
The average rate on a 30-year mortgage rose to 6.90% from 6.77% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.5%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week, pushing the average rate to 6.29% from 6.12% last week. A year ago it averaged 5.76%, Freddie Mac said.
The latest increase in rates reflects recent moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Stronger-than-expected reports on inflation, the job market and the overall economy have stoked worries among bond investors the Federal Reserve will have to wait longer before beginning to cut interest rates.
Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates can influence rates on home loans.
“Strong incoming economic and inflation data has caused the market to re-evaluate the path of monetary policy, leading to higher mortgage rates,” said Sam Khater, Freddie Mac’s chief economist.
When mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in rock-bottom rates two or three years ago from selling. The average rate on a 30-year mortgage remains sharply higher than just two years ago, when it was 3.89%.
The cost of financing a home has come down from its most recent peak in late October, when the average rate on a 30-year mortgage hit 7.79%, the highest level since late 2000.
The pullback in rates helped lift sales of previously occupied U.S. homes by 3.1% in January versus the previous month to the strongest sales pace since August.
Competition for relatively few homes on the market and elevated mortgage rates have limited house hunters’ buying power on top of years of soaring prices. With rates creeping higher in recent weeks, it puts more financial pressure on prospective home hunters this spring, traditionally the busiest period for home sales.
“Historically, the combination of a vibrant economy and modestly higher rates did not meaningfully impact the housing market,” said Khater. “The current cycle is different than historical norms, as housing affordability is so low that good economic news equates to bad news for homebuyers, who are sensitive to even minor shifts in affordability.”
