Mortgage rates surge higher second week in a row

Days of record-low rates a ‘thing of the past,’ Zillow economist says

The days of mortgage rates below 3% are fast coming to a close.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 2.97% with an average 0.6 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 2.81% a week ago and 3.45% a year ago. The 30-year fixed average has risen 24 basis points in the past two weeks. (A basis point is 0.01 percentage point.)

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. Because of those criteria, these rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be higher. The price adjustment for refinance transactions that went into effect in December is adding to the cost. The adjustment, which applies to all Fannie Mae and Freddie Mac refinances, is 0.5% of the loan amount. That works out to $1,500 on a $300,000 loan.

The 15-year fixed-rate average jumped to 2.34% with an average 0.6 point. It was 2.21% a week ago and 2.95% a year ago. The fiveyear adjustable-rate average spiked to 2.99% with an average 0.1 point. It was 2.77% a week ago and 3.20% a year ago.

“Mortgage rates pushed higher this week, all but officially making the days of record-low rates a thing of the past,” said Matthew Speakman, a Zillow economist. “After months of holding firm, even as Treasury yields steadily climbed, mortgage rates have finally relented in the past couple weeks, keeping pace with yields that have turned their steady jog upward into an all-out sprint.”

It once was that long-term bond yields were the most reliable predictor of where mortgage rates were headed. That’s been less so lately. However, now that there seems to be light at the end of the tunnel in the pandemic, they are once again turning into a reliable indicator.

The yield on the 10-year Treasury rose to 1.42% during the day on Wednesday — its highest level in a year — before closing out the day at 1.38%. It started the month at 1.09%, steadily rising over the past few weeks in part because investors are expecting inflation to ramp up later this year when the economy reopens, pent-up consumer demand is unleashed, and Washington approves a stimulus plan.

“Honestly, mortgage rates were artificially low, under 3%, because COVID-19 isn’t a normal economic event,” said Logan Mohtashami, housing analyst at HousingWire.