Interest rates inch up after Biden unveils infrastructure plan

While not the surge seen in recent weeks, the continued upward trajectory of interest rates is bringing borrower demand closer to pre-COVID levels.

Average rates for the 30-year FRM rose to 3.18%, up 1 basis point from the week prior and its highest point since June 2020, according to Freddie Mac's Primary Mortgage Market Survey. However, the average still sits below the year-ago rate of 3.33%.

The overall improvements in the economy and increased Treasury yields throughout the first quarter drove mortgage rate growth. Treasury yields rose again on Wednesday after President Biden released details on his proposed infrastructure plan, noted Zillow economist Matthew Speakman, who issued comments on Wednesday night.

“As the economy continues to thaw from its pandemic-induced freeze and government spending increases, upward pressure on mortgage rates should remain,” Speakman said. “A key test of the economy’s recovery efforts will come from the March job figures which are due to be released Friday.”

The average 15-year FRM held at 2.45% from last week and remained down from 2.82% a year before. The five-year Treasury-indexed hybrid adjustable-rate mortgage also stayed static week-over-week at an average of 2.84% but dropped from 3.4% year-over-year.

Application volume keeps taking hits as interest rate growth cuts refinancing incentives and squeezes affordability for buyers amid historically low inventory.

“Homebuyer demand has gone from 25% above pre-COVID levels at the start of the year, when mortgage rates hit record lows, to 8% above pre-COVID levels today,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “We even see that purchase demand is diminished today as compared to late May and early June of 2020, when mortgage rates were the same level.”