The 30-year mortgage rate exceeds 3% for the first time since July

Americans who bought new homes or refinanced their mortgages in recent months may have done so at the right time.

The median rate on a 30-year fixed-rate mortgage rose to 3.02%, home loan giant Freddie Mac said on Thursday. It’s the first time the rate on America’s most popular home loan has risen above 3%. since July and the fifth consecutive week it has increased or remained stable.

Mortgage rates fell for most of 2020 after the Covid-19 pandemic devastated the economy. That helped fuel the biggest mortgage loan boom since before the financial crisis, fueled by refinancing. When rates hit 2.98% in July, it was the first time below the 3% mark in about 50 years of record-keeping.

Recent upward movements paint a stark contrast: More vaccines in the U.S. and recent progress on the latest coronavirus relief bill have improved investors’ outlook on the economy, a key variable in determining rates of interest.

Mortgage rates tend to move in the same direction as the 10-year Treasury yield, which has been increasing. Treasury yields rise when investors feel confident enough in the economy to forego safe assets like bonds for riskier ones, including stocks. Last week, the performance reached its highest level in a year.

Freddie Mac chief economist Sam Khater said he expects a strong selling season, in part because he believes “the uptrend in rates from here will be more moderate than in recent weeks.” The Federal Reserve has said it will keep interest rates ultra-low until the economy improves.

“The Fed has seen the carnage of the last crisis, and they don’t want to get ahead of the recovery by starting to raise rates and stifle that nascent recovery,” Khater said.

However, rising rates have started to affect home purchases and refinance applications in recent weeks.

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Higher mortgage rates could discourage some prospective buyers from trying to buy a home during the key spring sales season, because higher interest rates translate into higher monthly payments. That could prompt people to look for a cheaper home or put their homeownership goal on hold.

Even before the recent rate hike, rising US home prices had begun to outpace the savings offered by historically low interest rates. The typical monthly mortgage payment in the fourth quarter increased to $ 1,040 from $ 1,020 a year earlier, even as mortgage rates declined, according to the National Association of Realtors.

Rising rates may also slow down refinances, which accounted for about 60% of mortgage origination in 2020, according to the Mortgage Bankers Association.

At a 30-year rate of 2.75%, about 18 million US homeowners could lower their monthly payments by refinancing, according to mortgage data firm Black Knight. Inc.

When the rate goes up to 3.25%, the pool of eligible homeowners drops to about 11 million.

Homeowners like Lindsay Ellis of Charlotte, North Carolina, who closed with a refinance last month, may have secured some of the lowest mortgage rates available for the foreseeable future.

Ms. Ellis lowered her condo rate from approximately 4.6% to 2.9% through a refinance with Rocket Cos. You haven’t decided where you’ll put the roughly $ 160 in monthly savings, but you plan to explore different investment options.

“I didn’t have to do a lot of work searching and comparing rates because the rate they gave me was excellent,” he said.

Ms. Ellis would not have qualified for a refinance when rates began to fall last year because unemployment benefits kept her afloat for part of 2020. Ms. Ellis, director of fitness, was laid off from her job last year St. Patrick’s Day and wasn’t able to return until the fall. She began considering refinancing soon after.

Write to Orla McCaffrey at [email protected]

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