Interest rates have risen to the highest point in more than six months.
The 30-year fixed-rate mortgage averaged 3.05% for the seven days ending Oct. 14, according to the Freddie Mac Primary Mortgage Market Survey. That jumped six basis points from 2.99% the week before and 24 points from 2.81% one year ago. It’s also the highest rate since reaching 3.13% on April 8.
The latest growth should be a sign of things to come as momentum builds behind inflation and the Federal Reserve begins tightening its monetary policies.
“The September jobs report was generally viewed as ‘meeting the bar’ for the Federal Reserve to begin tapering asset purchases,” Paul Thomas, Zillow vice president of capital markets, said in a press statement. “Minutes from the September Federal Open Market Committee continue to point toward tapering starting at the end of the year, in line with current market expectations, which may jolt rates higher entering the new year.”
The central bank has maintained that tapering of bond-buying would align with economic recovery. Progress on congressional negotiations for the debt ceiling, retail sales data and an index on inflationary indicators published by the Bureau of Labor Statistics this week should dictate where interest rates move in the near-term, Thomas continued. In addition, the 10-year Treasury rate is predicted to finish 2021 at an average of 1.6%, up from 0.93% in 2020, according to the Urban Land Institute’s Real Estate Economic Forecast. The yield closed at 1.54% on Oct. 13.
The 15-year fixed-rate also saw a weekly boost to 2.3%, gaining seven basis points from 2.23%. However, it stood below the year-ago average of 2.35%. The 5-year Treasury-indexed adjustable-rate rose three basis points to 2.55% compared to 2.52% the week prior, while trailing last year’s average of 2.9%.
The anticipated increase of interest rates squeezes affordability further as the housing market continues to face extreme property value appreciation.
“Historically speaking, rates are still low, but many potential homebuyers are staying on the sidelines due to high home price growth,” said Freddie Mac Chief Economist Sam Khater.
