This year’s surge mortgage rates jumped to their highest level since June has crimped how much house hunters can borrow and could slow homebuying’s upswing.
Mortgage buyer Freddie Mac reported the average rate as of March 25 on the 30-year fixed-rate home loan rose to 3.17% from 3.09% the previous week — to the highest level since June.
At this rate, a $2,500-a-month house payment gets a borrower a $580,278 on a 30-year loan. Compared to the historic low of 2.65% set on Jan. 7, that’s $40,125 less in just 11 weeks — a 6.5% loss of buying power.
But rates are still low — looking back one year: That week’s 3.5% rate got the same borrower only a $556,737 mortgage. So over 12 months, there’s still a $23,541 (or 4.2%) boost in buying power.
PS: March 25’s average rate on 15-year fixed-rate loans, popular among those seeking to refinance their mortgages, increased to 2.45% from 2.40% last week. It was 2.92% a year ago.
Economists have expected modest increases in home-loan rates this year, though they likely will remain low while the Federal Reserve keeps interest rates near zero until the economy recovers from the coronavirus pandemic. Record-low lending rates have prodded buyers into the housing market, which has been one of the strengths of the U.S. economy. But a shortage in the supply of homes remains a problem and has pushed prices higher.
The rate increase threatens to crimp a housing rally that was built on cheaper mortgages.
“Since January, mortgage rates have risen, leaving potential homebuyers with less purchasing power,” said Sam Khater, chief economist at Freddie Mac. “Unfortunately, this has disproportionately affected the low end of the market, where supply is the slimmest.”
The mortgage industry also got a boost from sliding rates in the pandemic, posting record profits as a flood of Americans refinanced debt and applied for loans to buy homes.
In 2021, rates have tracked a surge in yields for 10-year Treasuries, which last week reached their highest levels since January 2020 — before the pandemic started roiling global financial markets.
Also Thursday, the government reported that the number of people seeking unemployment benefits fell sharply last week to 684,000, the fewest since the pandemic erupted a year ago and a sign that the economy is improving. It is the first time that weekly applications for jobless aid have fallen below 700,000 since mid-March of last year.
The Associated Press, Bloomberg News and Jonathan Lansner of the Southern California News Group contributed to this report.
Source: Orange County Register