Mortgage rates have jumped to their highest level in nearly two years, threatening the country’s red-hot housing market.
Freddie Mac said Thursday that the rate for a 30-year fixed-rate mortgage has risen to 3.45%. It’s the highest rate since the pandemic struck in March of 2020 and comes as the Federal Reserve gears up to hike interest rates for the first time since 2018. The 30-year rate increased by nearly a quarter of a percent for the week, a brisk pace. Mortgage rates have ballooned from a year ago when the rate for a 30-year fixed-rate mortgage averaged 2.79%.
The rate for a 15-year fixed-rate mortgage averaged 2.62% for the week ending on Thursday, also up from the preceding week.
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“Mortgage rates rose across all mortgage loan types, with the 30-year fixed-rate mortgage increasing by almost a quarter of a percent from last week,” said Sam Khater, Freddie Mac’s chief economist. “This was driven by the prospect of a faster than expected tightening of monetary policy in response to continued inflation exacerbated by uncertainty in labor and supply chains.
Mortgage rates have been trending higher since the Fed’s December meeting, at which central bank officials signaled they would take a more hawkish approach to monetary policy in response to burgeoning inflation, which hit 7% for the year ending in December — the highest level in decades.
The higher mortgage rates could put a damper on the country’s housing market, which has been booming.
“The rise in mortgage rates so far this year has not yet affected purchase demand, but given the fast pace of home price growth, it will likely dampen demand in the near future,” Khater said.
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Regina Wallace-Jones, chief operating officer for California-based LendStreet, told the Washington Examiner last week that for people who are already homeowners and can refinance now before interest rates increase, those consumers “should be aggressively moving toward refinancing scenarios.”
Additionally, she said consumers interested in buying a house should try to make the purchase before the Fed hikes interest rates.
