After climbing for almost eight weeks straight, U.S. mortgage rates took a breather this week, a widely followed survey shows.
The rate on America’s most popular loan, the 30-year mortgage, stayed nearly the same. It typically rises and falls alongside Treasury yields, which dipped this week as investors worried about worsening COVID-19 cases and lockdowns in China, says George Ratiu, senior economist with Realtor.com. Such events could further congest supply chains that are causing costs for household goods to spike.
“Inflation is likely to run at a faster pace for longer than expected, keeping pressure on mortgage rates for the medium term,” Ratiu says.
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30-year fixed-rate mortgages
The average rate on a 30-year fixed-rate mortgage flattened to 5.10% this week, compared to 5.11% one week earlier, Freddie Mac reported Thursday. A year ago at this time, the 30-rate was averaging 2.98%.
Even though mortgage rates are higher than where they were last year, historically they’re not as high as they used to be, says Nadia Evangelou, senior economist for the National Association of Realtors.
In early 2002, for example, the average 30-year fixed-rate loan was averaging around 7%.
This week’s break in rates comes just ahead of a crucial two-day meeting of the Federal Reserve where policymakers are expected to hike the benchmark interest rate for the second time this year as inflation runs rampant.
Fed Chair Jerome Powell said at an International Monetary Fund seminar last week that a half percentage point increase would be “on the table” at the Fed’s May policy meeting. In March, the group raised the federal funds rate by a quarter percentage point.
“It is appropriate in my view to be moving a little more quickly,” Powell said at the meeting.
The central bank is also set to start cutting the massive portfolio of U.S. Treasuries and mortgage-backed securities it acquired during the pandemic to keep borrowing costs low and the economy humming.
15-year fixed-rate mortgages
The 15-year fixed-rate mortgage is now averaging 4.4%, up from 4.38% last week, Freddie Mac says. Last year at this time, the 15-year rate was 2.31%.
Borrowers who take out 15-year loans typically pay less in overall interest costs and pay off their loans faster than homeowners with 30-year mortgages.
But the shorter loan term means that borrowers will make higher monthly payments. That can pinch homeowners already facing higher costs on everyday items like food, gasoline and housing.