Mortgage rates jump by over 50 basis points in two weeks

Mortgage rates surged over the past week, with the 30-year average crossing the 4.5% threshold, and economists expect further increases to come.

The average for the 30-year fixed-rate mortgage jumped a quarter of a percent, coming in at 4.67%, for the weekly period ending March 31, according to Freddie Mac’s Primary Mortgage Market Survey. The average jumped from 4.42% seven days earlier, and is now nearly 150 basis points higher than the rate of 3.18% one year ago.

The last time the 30-year rate exceeded 4.5% was during the first week of January 2019. Some of the same factors that started driving rates higher in November are still in play today.

“Mortgage rates continued moving upward in the face of rising inflation and the prospect of demand for goods amid ongoing supply disruptions,” said Sam Khater, Freddie Mac’s chief economist.

Experts anticipate more of the same in the coming months, with economic data from the past week showing a tight labor market and recent remarks by Federal Reserve chair Jerome Powell pointing to larger increases in the federal funds rate later this year. The central bank already raised it 25 basis points earlier in March.

“Consensus is now predicting several 50-basis-point hikes to the federal funds rate this year, which will lead to further upward pressure on mortgage rates,” said Paul Thomas, vice president of capital markets, in a research blog.

“With strong economic data releases last week, investors may be taking a view that the economy can handle more aggressive Fed action before any recessionary pressures would slow down rate hikes,” he added.

Fed guidance should lessen the threat of volatility that comes with the more aggressive monetary policy of late, said Robert Heck, vice president of mortgage at online marketplace Morty. But the potential for disruption from the Russia-Ukraine conflict remains.

The start of armed conflict in February and ongoing economic pressure “reached a fever pitch” a few weeks ago, Heck said, leading to a push-and-pull effect on mortgage rates. The volatility has largely subsided in the second half of March.

With investors taking signals from the Fed, the financial industry will be looking closely at upcoming economic reports to see how the central bank responds.

“Markets will be focused on inflation and employment data later this week for further signals of how rate increases are affecting the economy and how much it can withstand without dipping into a recession,” Thomas said.

Along with the rise of the 30-year mortgage, the 15-year fixed-rate average also climbed 20 basis points to come in at 3.83%, up from 3.63% one week earlier. In the same seven-day time frame last year, the 15-year rate averaged 2.45%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage also climbed over the past week to an average of 3.5%, up from 3.36%. One year ago, the average came in at 2.84%.