by Prashant Gopal
Mortgage rates in the US jumped to the highest level since the early months of the pandemic.
The average for a 30-year loan was 3.22%, up from 3.11% last week and the highest since late May 2020, Freddie Mac said in a statement Thursday.
Lower borrowing costs have helped fuel a housing market that has been running hot for the better part of two years. Rates plunged in 2020 as COVID-19 roiled the global economy and hit a record low of 2.65% a year ago. Despite the recent rise, rates remain relatively low by historical standards.
“With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise,” said Sam Khater, Freddie Mac’s chief economist. “The impact of higher rates on purchase demand remains modest so far.”
Rates tracked a gain in yields for 10-year Treasuries, which briefly topped 1.75% on Thursday. Treasury yields have climbed this week as investors brace for the Federal Reserve to redouble its efforts to control inflation.
At the current average, the monthly payment on a $300,000 mortgage would be $1,301. That’s up from $1,209 a year ago. With few properties available to purchase in a tight market, many Americans have struggled to find homes they can afford. Those affordability concerns could deepen if rates continue to tick up.
Rates will likely rise “modestly” this year, but stay below 4%, according to Greg McBride, chief financial analyst for Bankrate.com. Still, that will seem high “relative to the historic lows we’ve seen in the last 18 months,” he said.