Mortgage rates jumped this week. This may be just the start of an uptrend.
The average rate on the popular 30-year fixed-rate mortgage just passed 3% earlier this week, then jumped 9 basis points Thursday to 3.10%, according to Mortgage News Daily. The rate was 2.93% a week ago.
The move is both a reaction to the Federal Reserve’s latest comment on when it will raise rates and when it will start cutting mortgage-backed bond purchases. Fed Chairman Jerome Powell has indicated the two will occur sooner than expected.
While mortgage rates don’t follow the federal funds rate, they vaguely track the yield on the 10-year Treasury, which just hit its highest level since July 2.
Besides the Fed, rates are also reacting to general news about the economy and Covid-19.
“If we consider why mortgage rates ended up crushing previous historic lows in 2020, the answer was clearly Covid,” said Matthew Graham, chief operating officer at Mortgage News Daily. He noted that vaccines and falling cases drove rates up in early 2021, then the delta surge brought them down again in July.
“While the pace and volatility will vary due to other factors, we have always been intended to revert to higher rates as the pandemic eases, and this week’s case count suggests it s ‘sag again, “he added.
While rates are still historically low, today’s real estate market is so expensive that even the smallest rate changes have a disproportionate effect on buyers, especially first-time buyers. Prices continue to rise at double-digit rates for new and existing homes.
As a result, the sales share of first-time buyers in August fell to just 29%, the lowest since the start of 2019, when fixed 30-year rates exceeded 5%. Historically, first-time buyers represent around 40% of home sales.