Mortgage rates hit their highest level since last July. Will they continue to rise?
Mortgage rates have jumped noticeably this week, reaching their highest level since last July.
According to the Mortgage Bankers Association, the average 30-year mortgage rate is now 3.23%, down from 3.08% the week before and the biggest week-to-week jump in almost a year complete.
For borrowers who didn’t lock in their rates last week, the bump could be costly. On a loan of $ 250,000, the difference between the monthly payments is only about $ 21. Over the life of the mortgage, however, the spread is over $ 7,000.
Why the increase?
This isn’t the first rate hike since the start of 2021, although it is the biggest.
Rates have been rising for weeks now, going from 2.86% at the start of the year and hovering just below 3% for most of February. Rates hit their lowest level on record last December.
According to Michael Blake, president of capital markets at Fairway Independent Mortgage, there is a lot behind the recent rate hikes. But for the most part, this is positive data regarding retail sales, manufacturing, and other important market metrics.
“All of these points to a strong economic recovery at some point and are inflationary,” Blake said.
Another factor at work? That would be recent news on vaccines, as well as what it means for the economy.
“As more and more people receive the vaccine, it means we are getting closer to business recovery,” said Melissa Cohn, executive mortgage banker at William Raveis Mortgage. “Combined with the new stimulus package, it signals inflation, and inflation equates to higher rates.”
Will the rates continue to rise?
Rates could continue to climb as the economy recovers from the pandemic. How much (or when) is uncertain, but Blake expects the rise to be “gradual”.
“I can’t say when this is going to happen,” Blake said. “But we can expect rates to gradually increase as the economy strengthens.”
For buyers on the fence or homeowners considering a potential refinance, it may be a good idea to lock in rates now. Locks typically last 30 to 90 days and can protect you from rate increases while you wait for your loan to close.
“If you like the rate that is being offered to you, you should lock it in now,” Cohn said. “The more good economic news we receive, the more rates will rise.” Just make sure your application is ready and your lender is ready to close before the foreclosure expires.