Mortgage rates have come out soaring in just the second week of the year, reaching levels not seen since March of 2020, a closely watched survey shows.
Other new research shows the higher borrowing costs — which most experts say will only continue heading north as the economy improves — are prompting borrowers to lock in today’s mortgage rates that are still low by historical standards.
The average interest rate on a 30-year fixed-rate mortgage spiked to 3.45% last week, up from 3.22% the week earlier, mortgage giant Freddie Mac is reporting. Rates are the highest since the week of March 26, 2020, according to Freddie Mac’s data.
One year ago, the 30-year rate was averaging 2.79%, just above the all-time low of 2.65%, which hit during the first week of January 2021. But a lot has changed since then — namely inflation, and the Federal Reserve’s plans for combating it.
The government reported last week that inflation in 2021 shot up 7% — a 40-year high — amid a surge in demand for consumer products and an ongoing supply chain backlog.
“Mortgage rates rose across all mortgage loan types, with the 30-year fixed-rate mortgage increasing by almost a quarter of a percent” from the previous week’s average of 3.22%, says Sam Khater, Freddie Mac’s chief economist.
“This was driven by the prospect of a faster than expected tightening of monetary policy in response to continued inflation exacerbated by uncertainty in labor and supply chains,” Khater says.