Mortgage rates could rise further

Mortgage rates could rise further

Potential buyers walk into an open house for sale in Alexandria, Virginia.

Jonathan Ernst | Reuters

Mortgage rates have jumped higher this week. This could only be the start of an uptrend.

According to Mortgage News Daily, the average rate on the popular 30-year fixed-rate mortgage jumped more than 3% earlier this week, then jumped 9 basis points to 3.10% on Thursday. The rate was 2.93% a week ago.

The move is a response to the Federal Reserve’s latest comment on when it will hike rates and when it will start cutting back on mortgage-backed bond purchases. Fed Chairman Jerome Powell has indicated the two will occur sooner than expected.

While mortgage rates don’t follow the federal funds rate, they vaguely track the yield on the 10-year Treasury, which hit its highest level since July 2.Ra.

In addition to the Fed, rates are also reacting to general news about the economy and COVID-19.

“If we consider that mortgage rates crushed previous historic lows in 2020, the answer was clearly COVID,” said Matthew Graham, COO of Mortgage News Daily. Vaccines and the plummeting number of cases pushed rates up in early 2021, and then the delta’s rise lowered them again in July, he said.

“While momentum and volatility will vary due to other factors, we have always been intended to revert to higher rates as the pandemic abates, and as this week’s case suggests a rebound., ” They said.

While historically rates are still low, today’s real estate market is so expensive that even the lowest rates have a disproportionate impact on buyers, especially first-time buyers. Prices for new and existing homes continue to rise at a double-digit rate.

As a result, the buyer’s share of sales fell to just 29% for the first time in August, the lowest since the start of 2019, when rates exceeded 5% on fixed 30-year rates. Historically, first-time buyers represent around 40% of home sales.

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