Friday, January 14, 2022

Mortgage rates in the U.S. hit their highest levels since May 2020

WASHINGTON–Mortgage rates in the U.S. hit their highest levels since May 2020, helping to drive up the costs of buying a home at the same time home prices are already near record highs.

According to Freddie Mac, the average rate for a 30-year fixed-rate loan was 3.22%, up from 3.11% one week earlier. One year earlier mortgage rates stood at 2.65%.

Meanwhile, the median existing-home price rose 13.9% in November from a year earlier to $353,900, according to the National Association of Realtors. The November figure for the median sales price for newly built homes also reflected an all-time high.

“Rates are really the biggest risk to the market,” Ivy Zelman, chief executive of real-estate research and advisory firm Zelman & Associates, told the Wall Street Journal.

The Difference in Payments

The Journal noted data provided by LendingTree show a 3.22% rate on a $300,000 loan would create a monthly payment of about $1,300. At 2.65%, where the average mortgage rate stood a year ago, the monthly payment would be $1,209. (Both figures exclude taxes and insurance).

“I think that a 4% mortgage rate would kill the housing market,” Zelman was quoted as saying. “So many people are locked in below that rate, and that’s really what matters.”

The National Association of Realtors is forecasting the 30-year fixed mortgage rate to hit 3.7% at the end of 2022, a “borrowing rate that the industry group’s economists believe is still low enough to keep the housing boom going,” the Journal added.

Treasury Yields Rise

The report further noted mortgage rates in recent days have followed the steep climb in U.S. Treasury yields, which set a floor on borrowing costs across the economy. The yield on the benchmark 10-year U.S. Treasury note settled Thursday at 1.733%, according to Tradeweb, up from 1.496% last Friday, the Journal reported.

“Yields started rising sharply on Monday, a sign that investors were making fresh bets on Federal Reserve rate increases, reflecting expectations that the U.S. economy will continue expanding and that officials will move to bring inflation down,” the Journal stated. “Yields got an extra boost Wednesday, when minutes from the Fed’s December meeting showed officials were eyeing a faster timetable for raising rates this year.”

As reported earlier, Americans borrowed a record $1.61 trillion to purchase homes during 2021, according to the Mortgage Bankers Association.

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