Mortgage rates inch back over 3 percent

Experts say the window for low interest may be closing

The average interest rate on a 30-year fixed-rate mortgage topped 3 percent for the first time since July, according to a survey by the government-sponsored mortgage company Freddie Mac.

The 30-year fixed-rate mortgage averaged 3.02 percent last week, up from 2.97 percent the week before. Rates, which fall in response to economic uncertainty, had plummeted to historic lows during the pandemic and hit their lowest point — an average 2.65 percent for a 30-year fixed-rate mortgage, according to Freddie Mac — shortly before President Joe Biden’s inauguration in January.

While rates have begun to drift back upward, they remain significantly lower than they were before the pandemic. A year ago, the average for a 30-year fixed-rate mortgage was 3.29 percent; two years ago, it was 4.41. Nonetheless, the refinance market, which had boomed as mortgage rates broke records for falling to the lowest they’ve been in Freddie Mac’s history, has drawn back in response.

Applications for refinancing loans fell 11 percent in the week ending Feb. 19 from the week before, according to the Mortgage Bankers Association, though they were still 50 percent higher than the same week a year before, before the pandemic and its ac

companying recession drove rates down.

When investors are concerned about the future of the economy, they seek safer investments and pour money into government bonds and mortgage debt. Investors are so hungry for security that they are willing to accept lower yields, driving down the interest paid on bonds and mortgages. Actions by the Federal Reserve to support the economy, including cutting shortterm rates to near zero and buying government- and mortgage-backed bonds, are also driving down mortgage rates.

On Wednesday, the yield on the 10-year Treasury note reached 1.5 percent, backing off slightly to 1.46 percent Thursday morning.

Low mortgage rates are a silver lining in the dark cloud of economic uncertainty and federal policy: Homeowners have the opportunity to pay less on interest, thereby lowering monthly expenses. And buyers, who also can borrow at lower interest rates, can take out larger loans for the same monthly expense they could have if rates were higher, allowing them to buy higher-priced homes.

“The sharp rise in interest rates over the past few weeks, coupled with double-digit price appreciation, is curtailing many buyers’ budgets,” George Ratiu, senior economist for the home-listing website realtor.com, said in an email. “As we head into mid-March, when the housing market typically hits its spring season stride, first-time buyers will be eager to find a home before rising rates push their search out of reach.”

Homeowners who have not yet taken advantage of low rates may be seeing the window closing, Ratiu added.

“With the U.S. president indicating that there should be enough COVID vaccines available for every American by May, and the U.S. House of Representatives passing additional stimulus in the latest bill, investors retreated from the bond market, driving rates higher,” he said. “While financing remains attractive by historic trends, rock bottom interest rates are likely behind us for the foreseeable future.”