US Mortgage rates are climbing, and are up significantly from the record low a few weeks ago. Freddie Mac‘s Primary Mortgage Market Survey (PMMS) shows 30-year fixed mortgages hit a multi-month high for the week ending March 4, 2021. The lender said this is the highest average reading for the index since July.
US 30-Year Fixed Mortgages Hit 8 Month High
The average US 30-year fixed mortgage hit the highest level in months. Freddie Mac data shows the average rate reached 3.02% for the week ending March 4, 2021. Just a week before, the rate was only 2.97%. The all-time low was in the first week of January, when it fell to 2.65%. This is a very rapid climb.
US 30-Year Fixed Mortgage Rates
The average US mortgage rate for a 30-year fixed mortgage, according to Freddie Mac’s Primary Mortgage Market Survey.Source: Freddie Mac, Better Dwelling.
Mortgage rates are still below pre-pandemic levels, but are quickly reversing. This time last year, the rate was 3.29%, but those were pre-pandemic days. However, consider the all-time low was only in January. Almost half of the drop has reversed over just the past two months. Borrowers may be facing pre-pandemic mortgage rates in just a few more months.
Mortgage Borrowers Face Reduced Budgets
To understand how this impacts borrowers, let’s run some numbers on a household. A household making $100,000 on March 4, 2021, would have seen the maximum qualifying rate reduced around 0.6% compared to the week before. This week’s household would also see the maximum amount drop by 4.6% compared to one in the first week of January. Borrowers are seeing budgets shrink almost as fast as they expanded.
Treasury Yields Driving Rates Higher
Mortgage rates are rising as Treasury yields surge higher these past few weeks. Rising Treasury yields pressure mortgage rates to rise, to stay competitive. Otherwise investors in riskier mortgage backed securities, would flow into safer Treasury yields. Concerns about the virus are now being replaced with concerns of inflation. Investors don’t want to be caught with inflation adjusted losses. This problem isn’t unique to the US, with Canada also experiencing a similar issue.
Freddie Mac also noted purchasing activity remained high, similar to pre-pandemic levels. Lower rates provided lift to budgets, helping to push prices higher. Higher rates are likely to reverse some of that lift, and slow price growth. Whether the economy has improved enough to take over the home buying stimulus of rock bottom rates, remains to be seen.
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