Mortgage rates in the United States (US) jumped as a result of rising
inflation and stronger-than-expected consumer spending.
Federal mortgage mortgage company Freddie Mac reported that its mortgage
lending rate for 30 years was at 3.92% for the week ended February 17, up
3.69% from last week.
Chief Economist Freddie Mac Sam Khater observed that this increase brought
mortgage rates to their highest level since May 2019. In fact, mortgage
interest rates were on average last year at 2.81%.
"As rates and house prices rise, affordability has become a major hurdle for
potential homebuyers, especially as inflation threatens to strain consumer
budgets," Khater said.
Conditions will push mortgage costs much higher, adding to the burden on
Americans already trying hard to buy homes. The bidding war for the
country's tight supply lists has hurt many potential buyers.
What's more, the rates charged are more than a full percentage point higher
than they were about a year ago, when the 30-year average hit a record low
of 2.65%.
Even before the recent increase, mortgage payments for first-time buyers had
jumped to over 25% of household income in the fourth quarter of 2021.
According to data from the National Association of Realtors, this is the
worst affordability level in the last 3 years. Mortgage rates typically move
in tandem with the 10-year treasury yield which hit 2.03% on Wednesday
(16/2), up from the previous week's 1.94% level.
15-year fixed-rate mortgages average 3.15%, up from last week when it
averaged 2.93%. The five-year treasury index adjustable hybrid mortgage
averaged 2.98%, up from last week when it averaged 2.8%.
Economists had expected interest rates to rise in 2022 as the overall
economy stabilized but would still be near record lows.
Moreover, prices rose faster than expected. The Association of Mortgage
Bankers (MBA) predicts that 30-year mortgage rates will hit 4% by the end of
2022.
"Mortgage rates increased overall last week following the recent rise in
treasury yields, which have been moving higher due to unrelenting
inflationary pressures and rising market expectations of more aggressive
policy moves by the Fed," said the vice president. The Joel Kan Association
of MBAs.
As is known, the Fed is considering a series of hikes in its benchmark
interest rate as an effort to contain the highest inflation in the last 40
years.
