Mortgage Rates Startle Upward on Inflation Fears
The average rate for a 30-year fixed mortgage had its sharpest weekly increase in nearly a year, rising to the highest level since July and adding to evidence that the days of record-low interest rates may be over.
The average rate last week shot up to 3.23% from 3.08%, the Mortgage Bankers Association (MBA) said Wednesday, marking the biggest jump for any single week since March 2020. At an already low 3.5% or so before the COVID-19 pandemic began in March, the average continued to fall throughout 2020, reaching multiple new record lows and finally bottoming (at least for now) at 2.85% in mid-December.
Weekly averages that hadn’t changed much in December and January have now risen four weeks in a row, apparently cooling what has been a feverish housing market. While the ultra-low borrowing costs turbocharged real estate sales as Americans spent more time at home during the pandemic, mortgage applications have dropped off in recent weeks.
“Mortgage rates jumped last week on market expectations of stronger economic growth and higher inflation,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.
The yields on 10-year Treasuries, which are a bellwether of mortgage and other loan rates, have been rising on expectations of higher consumer inflation. Some economists have begun to worry that another stimulus package from the federal government could trigger an inflation outbreak if pent-up consumer demand to spend money is unleashed as COVID-19 cases recede.
Despite the increase in rates, the MBA index measuring mortgage applications for purchases ticked back up slightly after three weeks of declines, but was still at its lowest level since May. Another index measuring refinance activity barely moved, staying at the lowest level since December.