Average long-term mortgage rates jump

A "Sold" sign is on display on the lawn of a new house in Pearl, Miss., Thursday, Sept. 23, 2021. Fierce competition, low mortgage rates and soaring prices helped drive how much homebuyers borrowed to purchase a home in 2021 to an all-time high, eclipsing the mid-2000s housing boom peak. Banks issued an estimated $1.61 trillion in home purchase loans last year, an increase of about 9% from 2020, according to the Mortgage Bankers Association.  (AP Photo/Rogelio V. Solis)
Written by Publishing Team

SILVER SPRING, Md. >> Average long-term mortgage rates in the US jumped again last week, reaching their highest level since March 2020, just as the coronavirus pandemic spreads in the US.

Mortgage buyer Freddie Mac reported today that the average 30-year home loan interest rate rose to 3.45% this week from 3.22% last week. It was at 3.5% in late March of 2020 when the pandemic was just beginning. A year ago, the 30-year rate was 2.79%.

The average interest rate on 15-year fixed-rate mortgages, which is popular with those refinancing their homes, rose to 2.62% from 2.43% last week.

“This was driven by the possibility of faster-than-expected monetary policy tightening in response to persistent inflation exacerbated by uncertainty in the business and supply chains,” said Sam Khater, chief economist at Freddy Mac. “The rise in mortgage rates so far this year has not yet affected buying demand, but given the rapid pace of home price growth, demand is likely to weaken in the near future.”

The housing supply was tight long before the pandemic, and prices have risen nearly 20% in the past year. High mortgage rates can make it difficult for homebuyers to secure a new home.

Mortgage rates were expected to rise this year after the Federal Reserve announced last month that it would begin to roll back its monthly bond purchases – which are aimed at lowering long-term interest rates – to slow accelerating inflation. But even with the expected three or four rate increases in 2022, the Fed’s benchmark interest rate will remain historically low at around 1%.

On Wednesday, the government reported that inflation rose to 7% in December from a year earlier, the largest such increase in four decades. Earlier today, the Labor Department reported that prices at the wholesale level rose by a record 9.7% in December compared to the previous year.

In addition to rising inflation, experts expect strong economic growth and a tight labor market to continue pushing interest rates higher.

Although US jobless claims rose by 23,000 last week to 230,000, they are still low by historical standards and the highly contagious omicron variant does not appear to have caused layoffs just yet.

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