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Freddie Mac, the U.S. mortgage lender, said Thursday (March 4) that the 30-year fixed mortgage rate rose to 3.02 percent, the first Time the rate has exceeded 3 percent since last July and the fifth straight week it has risen or remained flat.
The 30-year fixed mortgage rate fell to 2.98 percent last July, the first time in about 50 years that it was below 3 percent, the Wall Street Journal reported.
The recent acceleration in vaccinations and progress in Congress on the $1.9 trillion economic aid package have made investors optimistic about the prospects for economic recovery, a key variable affecting borrowing costs.
Mortgage rates are moving in the same direction as the 10-year bond yield, which is currently trending higher. In general, when investors have increased confidence in the economic outlook, they will withdraw from safe-haven assets such as bonds and turn to risky assets such as stocks. Last month, the U.S. bond yield hit its highest level in a year.
Freddie Mac’s chief economist Sam Khater still expects strong spring Home sales, in part because he thinks mortgage rates will rise in the future weaker than in the past few weeks. Federal Reserve Chairman Jerome Powell recently said that before the economy improves will maintain the current interest rate close to zero. Hartle said the Fed has learned from the last crisis, will not rush to raise interest rates to avoid stifling economic recovery.
However, rising mortgage rates have affected home sales and refinance applications in recent weeks, while also discouraging buyers interested in the spring home sales season.
In fact, before the rise in mortgage rates, rapidly rising home prices are already undermining the purchasing power of U.S. consumers. According to the National Association of Realtors (NAR), the typical monthly mortgage payment rose to $1,040 in the fourth quarter of last year, up from $1,020 a year earlier, amid declining mortgage rates.
In addition, higher mortgage rates will stop refinancing activity. About 60 percent of new mortgages were refinanced last year, according to the Mortgage Bankers Association.
When the 30-year fixed mortgage rate is 2.75 percent, about 18 million U.S. homeowners can save on their monthly payments by refinancing; when the rate is 3.25 percent, that figure will shrink to about 11 million, according to mortgage data firm Black Knight Inc.
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