New surveys show that mortgage rates have risen to their highest level since at least last summer, if not more than a year. And the journey to heaven doesn’t seem over yet.
“The recovery in business ensures mortgage rates continue to rise this year. The move means higher financing costs for buyers and sellers,” said Danielle Hale, chief economist at Realtor.com.
Data on mortgage applications shows that the higher interest rates have largely hibernated borrowers – but experts say this is the wrong step if you’re looking to buy a home or refinance an existing home loan Reduce your monthly mortgage payment.
Because today’s prices could soon look extremely cheap.
30 year mortgage
According to Freddie Mac’s 50-year survey, the average interest rate on a 30-year fixed-rate mortgage rose to 3.05% over the past week.
Interest rates rose from an average of 3.02% the previous week and hit their highest level since July 2020, the state-sponsored mortgage giant reported on Thursday.
Other surveys report even higher averages. The Mortgage Bankers Association (MBA) announced last week that the typical 30-year fixed-rate mortgage is now 3.26%, and Mortgage News Daily reported Friday that 30-year loan interest rates had risen to 3.32% on average – the steepest in a year.
Mortgage rates are soaring as investors become more optimistic about the economic recovery, said Matthew Graham, chief operating officer of Mortgage News Daily.
“The acceleration in 2021 is mostly about increased vaccine distribution, a sharp drop in the number of cases and passing on more stimuli for COVID relief,” said Graham writes.
15 year mortgage
Freddie Mac said interest rates on other popular types of home loan have been slightly higher over the past week.
The average for a 15-year fixed-rate mortgage rose from 2.34% to 2.38%. These short-term home loans averaged 2.77% over the past year.
Fifteen year loans are a popular choice for refinancing, but the demand for refi applications has cooled.
Last week, refinancing loan demand fell 5%, declining for the fourth time in five weeks.
5/1 adjustable rate mortgages
Starting rates on 5/1 adjustable rate (ARM) mortgages saw a similar surge last week, rising from 2.73% to 2.77% in the Freddie Mac survey.
A 5/1 ARM contains an interest rate that is set for the first five years of the mortgage. It can then adapt or down – every year after that.
A year ago, ARMs averaged 3.01%.
Why are mortgage rates rising – and where are they going next?
Mortgage rates are closely tied to activity in the bond market and follow the 10-year Treasury note returns on the rate of return. That return has declined as investors shoveled money from bonds into stocks, which carry higher risk.
When Congress passed the $ 1.9 trillion COVID-19 stimulus package last week, it signaled to investors that higher consumer spending and economic growth could be imminent. This positive news sparked an even bigger retreat from the bond market, driving up mortgage rates.
As businesses rebound, borrowers can expect interest rates to continue to rise, possibly faster.
“The move means higher financing costs for buyers and sellers,” said George Ratui, senior economist at Realtor.com. “For homeowners looking to refinance, higher interest rates close the door to possibilities.”
Is it too late to borrow? No
Given the risk that mortgage rates will continue to rise, prospective borrowers shouldn’t settle down right now, experts say. Peter Warden, editor of The Mortgage Reports website, recommends that readers lock an interest rate now, whether they have a loan that will close in seven or 60 days.
If you are a homeowner, you may still have the option to refinance and save hundreds of dollars per month.
Mortgage technology and data provider Black Knight reported in early March that 12.9 million mortgage holders were still good candidates for refinancing. You could chop their mortgage rates by at least three quarters of a point (0.75), had a solid credit score and a healthy amount of home equity.
If you haven’t seen your credit score in a while, these days it is easy Take a look at your credit score free.
To get the best interest rate on a refinancing mortgage, you need to shop around. Compare loan offers from at least five lendersbecause several studies have found that five is the magic number for sagging at a low rate that can save you thousands over time.
Even if refinancing doesn’t save you money, there are likely other ways you can reduce the total cost of owning a home. When it’s time to buy or renew homeowner insurance, a little more comparison shopping can go a long way: Check the rates of several insurers to find the best deal on the coverage you need.