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Mortgage rates have now increased in six of the last eight weeks. According to Mortgage Bankers Association (MBA) latest weekly survey, average 30 Year Fixed mortgage rates climbed above 3%. The higher rates resulted in refinance activity falling 11% to its lowest levels since December 2020.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.08 percent, with points increasing to 0.46.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.23 percent with points increasing to 0.43.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.00 percent from 2.93 percent, with points decreasing to 0.33 from 0.37 (including the origination fee).

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.56 percent with points increasing to 0.40.

Note that these are the rates for a primary residence. Second/Vacation homes are typically .125% higher and investment/rental properties are .375%-.50% higher than primary residence rates.

The 10-year Treasury yield benchmark is an indicator of the movement interest rates will make and has been trending upwards since the end of January. This rise in yields contributed to mortgage rates rising.  The chart below shows 10-year treasury was at 1.05 on January 25th and climbed to 1.52 on February 25th. with mortgage rates climbing along with it. This is one of the sharpest rises in recent times.

 

10 Year Treasury

The recovering economy is also a contributing factor. With a Democratic majority in Congress, the likelihood of further stimulus and relief packages being passed has increased. Further fiscal relief and the economic growth that will likely come as a result of increased vaccinations could drive up inflation. Increased government spending also means an increase in the issuance of bonds, which are used to pay for assistance programs.

Mortgage Bonds

 

Mortgage rates and bonds have a symbiotic relationship. Rates are tied to bond prices. Therefore, with a surplus of bonds, the price of the bonds goes down, and interest rates on those bonds rise. Mortgage rates rise as a result. The chart above shows the price of mortgage bonds in the last 2 weeks. The days with red candlesticks mean the bond’s prices went down and the mortgage rates went up. As can be seen, on most days the rates went up and on some days the climb was significant. 

Industry experts predict that a combination of all these factors could continue to drive up mortgage rates in the near future. 

Despite the rise, the current rates are still (comparatively) very low. As mortgage rates rise, this could be the last chance homebuyers have to take advantage of low rates for the near future. If you are a prospective homebuyer, there is no better time than now to take advantage of them! Get started today by getting a rate quote here.