Average 30-year-fixed rate hits 3% for the first time in a month

The 30-year fixed-term mortgage rate average reversed course, heading upward for the first time in three weeks, after Federal Reserve officials suggested monetary policy changes may be due later this year.

After the average 30-year-fixed rate bubbled under the 3% level for a month, it finished the weekly period ending May 20 at 3%, according to Freddie Mac’s weekly Primary Mortgage Markets Survey. The rate climbed from 2.94% the previous week, but still sits lower than the 3.24% from one year ago.

The Federal Reserve maintained throughout the pandemic’s financial crisis that it intends to leave interest rates low until the U.S. makes “substantial” economic progress in its recovery. At its April meeting, the Fed’s Open Market Committee reiterated that point by unanimously voting to keep short-term borrowing rates close to zero as well as continue its pace of bond purchasing.

But some officials at that meeting also hinted the country might be nearing the reset point in its approach to bond buying, according to the minutes released this week. The statement was enough to push mortgage rates higher, said Zillow economist Matthew Speakman.

“With a relatively light week of economic data upcoming, comments from Fed presidents in the coming days should offer crucial insight into the central bank’s plans and could result in more volatility for mortgage rates,” he added.

Rates hovering near 3% led to a rush of borrowers seeking refinancing this spring, while limited housing supply limited the pace of purchasing. The refinancing share of mortgage application volume hit 63.3% last week, its highest level since March, based on weekly data reported by the Mortgage Bankers Association.

“Despite this favorable rate climate, there remains a shortage of homes for sale. The lack of housing supply has been compounded by labor disruptions and expensive building materials that are driving up the cost of new housing, making it difficult for home buyers to find homes to purchase,” said Sam Khater, Freddie Mac’s chief economist.

The average interest rate for 15-year fixed-term mortgages also finished higher for the week, coming in at 2.29% compared to 2.26% a week prior. One year ago, the rate averaged 2.7%.

The average of the 5-year Treasury-indexed adjustable-rate mortgage saw no change, remaining at 2.59% week over week, compared to 3.17% in the same period last year.