As mortgage rates jump above 3% for the first time since April, economists warn they’re likely to rise higher
Benchmark mortgage rates rose above the 3% mark once again, as bond markets responded to signs that the Federal Reserve could hike rates sooner than previously expected.
The 30-year fixed-rate mortgage averaged 3.02% for the week ending June 24, up nine basis points from the previous week, Freddie Mac FMCC,
The 15-year fixed-rate mortgage, meanwhile, rose 10 basis points to an average of 2.34%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.53%, up one basis point from the previous week.
“ ‘Markets once again appear to be in a holding pattern, waiting for the next bit of news that might push yields and rates in one direction or another, and they might not have to wait much longer.’ ”
Mortgage rates roughly follow the direction of long-term bond yields, including the 10-year Treasury note TMUBMUSD10Y,
“All told, after a brief jolt upwards, markets once again appear to be in a holding pattern, waiting for the next bit of news that might push yields and rates in one direction or another,” said Matthew Speakman, an economist with Zillow, “and they might not have to wait much longer, as May inflation figures are due on Friday.”
If rates continue to rise, that would be bad news to homeowners and buyers alike. A recent survey from Zillow Z,
“As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” Freddie Mac chief economist Sam Khater said in the report. “For those homeowners who have not yet refinanced — and there remain many borrowers who could benefit from doing so — now is the time.”
Rising rates also pose significant challenges to home buyers. Home prices continue to increase at a breakneck pace, and the median price for an existing home has reached a record high. The combination of rising rates and rising prices could end up pricing a lot of Americans out of the real estate market, which could prolong the downturn in home sales seen in recent months.
“Buyers are running out of steam,” said George Ratiu, senior economist at Realtor.com. He added that the housing market desperately needs a greater supply of homes to tamp down rising prices. “Without additional supply, favorable financing remains a one-legged stool trying to provide a wobbly foundation for sustainable growth,” he said.
