Wait, What? Mortgage Rates Really Have Jumped That Fast

Number of the Day: The most relevant or interesting figure in personal finance

Number of the Day

That’s how few days it took for the average 30-year mortgage rate to rise more than an entire percentage point, showing how quickly things are changing for the housing market. 

The average interest rate offered for a 30-year fixed mortgage surged to 5.17% on March 25 from 4.16% on March 1, according to lender data provided to The Balance Monday. To put that in perspective, the average stayed in 3% territory for all of last year.

This year’s rising borrowing costs—which swelled the average monthly mortgage payment on new loans by $270 even before the March spike—could be a game-changer for the pandemic-era housing market. Home sales and mortgage applications have already started to slow, and the Federal Reserve plans to keep raising its benchmark interest rate to combat inflation that hasn’t been this high in decades.  

Less interest from homebuyers might actually help bring some balance to real estate listings, where home sellers have held all the cards and prices have soared to record levels.

Buyers saw their purchasing power bolstered when rates dropped to all-time lows early in the pandemic, but there weren’t enough homes on the market to meet the demand. (The 30-year got as low as 2.89% in December 2020, according to our data.) If the dynamic reverses course, rising rates could quash the extreme price increases as more homes come on the market.

That said, there’s a risk the tables could turn too far, and prices could start to fall as the market gets flooded with homes that find no buyers, economists at ING warned in a commentary last week.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

Article Sources