Mortgage rates have continued to rise in the last three weeks as they touched the highest rates in the U.S. in almost two years.
The average rate for a 30-year mortgage loan was up from 3.22% last week to 3.45 % on Thursday, as per a statement from Freddie Mac indicating the highest rate since March 2020.
10-Treasury yield also jumped as rates climbed to the highest since 2020 after the pandemic disturbed the financial markets. The Federal Reserve is stepping up its efforts to contain inflation by cutting down on stimulus and hiking interest rates. The improvement in the job market points to an increase in borrowing costs.
The increase in borrowing costs will lead to a hike in mortgage rates and a further burden on homebuyers who find it difficult to afford a purchase. More than a year ago, the mortgage rates for 30-year tenor had tumbled to a record low. Cheap loans had helped in the housing rally, continuing even as Americans find home prices soar out of their reach.
In a statement, Freddie Mac’s chief economist, Sam Khater, said that home purchase demand has not yet been affected despite the rise in mortgage rates in this year so far. But with the home price growing fast, it will dampen the demand shortly.
Some indications suggest that inflation may be waning with the index measuring prices – a price paid to the U.S. producers showing lower than expected.
Keith Gumbinger, vice president with HSH.com, a mortgage information company, says that interest rates stabilize once inflation cools off.
At the present average mortgage rates, a monthly payment of $300,000 will come to $1,339. This is higher than the $1,209 per month that was a record low in January 2021 at 2.65%.
