Average long-term U.S. mortgage rates continued to rise this week. The rate on the benchmark 30-year loan breached 3.5%.
Home loan rates have been running in recent weeks at levels not seen since early 2020, when the coronavirus pandemic was breaking in the U.S. They remain at historically low levels, however.
Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year loan rose to 3.56% from 3.45% last week. By contrast, it stood at 2.77% a year ago.
The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, jumped to 2.79% from 2.62% last week.
Mortgage rates have been expected to rise this year after the Federal Reserve announced last month that it would begin dialing back its monthly bond purchases — which are intended to lower long-term rates — to slow accelerating inflation. But even with the expected three or four rate increases in 2022, the Fed’s key rate would still be historically low at around 1%.
Last week, the government reported that inflation spiked to 7% in December from a year earlier, the sharpest such increase in four decades. In addition, the Labor Department reported that prices at the wholesale level surged by a record 9.7% last month from December 2020.
In addition to surging inflation, experts expect robust economic growth and the tight labor market to continue to push rates higher.
Freddie Mac economists expect the higher mortgage rates to bring a modest decline in purchasing demand ahead of the spring homebuying season. They note that the supply of homes available for sale remains tight and prices are still high.
Available housing has been in short supply since long before the pandemic started, and prices have risen close to 20% over the past year. Higher mortgage rates could make it even harder for homebuyers to secure a new home.
New data released Thursday showed that sales of previously occupied homes fell in December for the first time in four months as many would-be buyers were frustrated by a lack of available homes — which fell to the lowest level in over two decades.