The average cost of borrowing a 30-year fixed loan mortgage in the United States rose to 2.97 percent from 2.81 percent last week and was the highest since August, according to Freddie Mac data released on Thursday [File: Bloomberg]
Mortgage rates in the U.S. rose to the highest level in six months, with higher borrowing costs threatening to crimp the pandemic housing rally.
The average for a 30-year, fixed loan was 2.97%, up from 2.81% last week and the highest since August, Freddie Mac data showed Thursday. Rates have climbed from the record low of 2.65%, reached in early January.
The pandemic housing boom was built on historically low mortgage rates. Now, vaccines are raising optimism about an economic recovery and Treasury yields are ticking higher.
A rapid jump in borrowing costs threatens the rally. Home prices are soaring across the nation, especially in suburbs where buyers are fighting over an increasingly scarce resource: listings.
“There’s not enough for sale,” said Greg McBride, chief financial analyst at Bankrate.com, which tracks mortgage rates. “Maybe that means downshifting from red hot to merely sizzling.”
Investors are increasingly optimistic that if life gets back to normal, jobs will return to the economy. At the same time, the yield on 10-year Treasuries, a benchmark for mortgages, reached its highest level in about a year this week.
The rise in rates is bad news for the mortgage business, which had been booming like never before. The industry posted record profits in 2020, with a flood of Americans seeking loans to buy houses and looking to refinance debt.
With rates climbing, mortgage applications dipped to a nine-month low last week, while pending home sales in January fell to a six-month low.