Mortgage rates surge to levels not seen since the early days of the pandemicMortgage 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.

Read more…