Mortgage rates hit highest point since July

Interest rates spiked 37 basis points since the calendar flipped to 2021 alongside rising Treasury bond yields.

While the pace slowed after last week’s 16-point surge, the average 30-year fixed rate climbed to its highest point since July 2020, according to Freddie Mac's Primary Mortgage Market Survey.

Average rates for the 30-year FRM broke the 3% threshold, rising to 3.02% from 2.97% week-over-week. However, it remains below the rate of 3.29% from this time a year ago.

The increases noticeably stifled recent borrower applications, but further growth should slacken right as the typical prime home buying season starts, said Sam Khater, Freddie Mac’s Chief Economist.

“While activity remains high, it’s currently on par with early March, prior to the pandemic,” Khater said in a press release. “However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”

The average for the 15-year FRM held at 2.34% from last week and remained far below the 2.795 from the year before. The five-year Treasury-indexed hybrid adjustable-rate mortgage dropped by 26 basis points to an average of 2.73% from 2.99% and fell from 3.18% year-over-year.

The improving economy, led by gradual impacts from vaccine distributions, will keep the upward pressure on interest rates. But there are other factors that will weigh on future rate movement, according to Zillow economist Matthew Speakman, who issued comments on Wednesday night.

“The pace of this upward momentum is far from certain – negative pandemic-related developments or surprisingly weak February jobs numbers are two factors that could keep mortgage rates in check or even nudge them back downward.” Speakman said.