The past year has been hard on many different sectors of the economy, including the housing market. However, growth in consumer confidence and home prices are now accompanied by a jump in U.S. mortgage rates.
For the week ending Feb. 25, mortgage rates saw their second consecutive week of rising rates. The week prior, mortgage rates saw an 8-basis point rise from the week before that. For the week ending Feb. 25, 30-year fixed rates jumped by 16 basis points to 2.97%.
The 15-year fixed-rate mortgage also saw a rate increase of 2.34%. The 30 and 15-year fixed-rate mortgages hit their highest points since August 2020. The last reported data marked the largest one-week move since last March when the pandemic lockdowns began.
The increases seen during February are not expected to stop. As the economy continues to improve and fears of inflation in the near future creep in, many economists also expect mortgage rates to climb.
“Mortgage rates will be higher in March. The prospect for economic recovery is strengthening and thereby lessening the hold on safe U.S. Treasury yields. In addition, more stimulus and the accompanying higher national debt will place upward pressure on inflation. Consequently, long-term interest rates, including the benchmark 30-year fixed-rate, will be rising,” said Lawrence Yun, chief economist for the National Association of Realtors in Washington, D.C.
Yun expects to see rates hitting about 3% in March and continuing to about 3.2% by the summer and 3.5% a year from now.
While rates are now past their lowest points ever and people looking to refinance missed out on that window, rates are still near historic lows. A year ago, the rate for a 30-year fixed mortgage was 3.45%.
Last year’s low mortgage rates were caused by the country’s tough economic situation and record-high unemployment numbers.
“The poor economic outlook in 2020 brought mortgage rates to record lows. Now that the economic skies are looking brighter, mortgage rates are retracing last year’s decline when they fell to previously unseen lows,” said Greg McBride, chief financial analyst for Bankrate.com.
The overall economic picture looks better for America as vaccinations against the coronavirus are rolling out. As people get vaccinated, economists expect that more people will start spending as sidelined parts of the economy open again.
Even as the economy continues to regain its footing, potential homebuyers and those looking to refinance their homes need not worry too much. The rise in rates should not be alarming to prospective buyers because the rising rates were inevitable, according to Yun. What home buyers should be mindful of is rapidly rising home prices. With the dropping supply of available homes and a steep increase in demand, home prices have risen 11.4% year-over-year.
