U.S. Mortgage Rates Surge to Highest Level in Two Months
(Bloomberg) -- Mortgage rates in the U.S. climbed to the highest level in two months.
The average for a 30-year, fixed loan reached 2.79%, up from 2.65% last week and the highest since Nov. 12, Freddie Mac said in a statement Thursday.
The increase follows a jump in yields for the benchmark 10-year Treasury, which climbed above 1% last week for the first time since March.
“As Treasury yields have risen, it is putting pressure on mortgage rates to move up,” Sam Khater, chief economist at Freddie Mac, said in the statement.
Mortgage rates have been below 3% since July, but higher borrowing costs could threaten a housing rally that’s been a bright spot in the pandemic-battered economy. With inventory of homes to buy scarce, the strong demand for larger properties in the suburbs has driven up prices.
As rates tick up, a lack of affordable properties may slow home sales. But that won’t be an issue until borrowing costs rise above 3%, according to Tendayi Kapfidze, chief economist at LendingTree.
The increase reported Thursday has “minimal effect on housing demand,” he said.
Keith Gumbinger, vice president at mortgage-information company HSH.com, agreed that housing demand won’t take much of a hit from the latest rise in rates. He said the jump to 2.79% from a record-low 2.65% last week would translate to less than $15 a month more on a $200,000 loan.
The question now is if rates will continue to climb. As vaccines roll out there’s optimism about an economic recovery if social-distancing guidelines ease. That could keep rates from dipping to new record lows.
“It’s worth keeping in mind that the worst economic conditions bring the lowest mortgage rates,” Gumbinger said. “Mortgage rates are more likely to be a little firmer over time, or at least have fewer reasons to continually revisit record-low levels.”
©2021 Bloomberg L.P.