Mortgage rates rose at the steepest rate in eight weeks, mortgage giant Freddie Mac said on Thursday. The average rate on a 30-year fixed mortgage jumped from 2.77% to 2.87% last week.
Rising mortgage rates are often a sign of a mending economy, but higher rates can make homeownership more expensive. An increase is usually a good indicator of rebounding consumer confidence and declining uncertainty among investors.
Mortgage rates rise and fall with the bond market. The 30-year fixed-rate mortgage average has steadily declined from 2000 to the present, according to The Balance.
Still, rates are currently the highest they’ve been in a month, MoneyWise reports. The average rate on a 15-year fixed mortgage also climbed last week, from 2.10% to 2.15%.
The Fed Can Also Affect Mortgage Rates
The Federal Reserve sets interest rates. Mortgage rates do not necessarily automatically track interest rate hikes or cuts by the Fed. But interest rates tend to have an indirect, delayed effect on mortgage rates.
So for example, if the Fed cuts interest rates, it can sometimes cause mortgage rates to spike at first. Eventually, the rates will probably drop back down. But if home buyers are looking to the Fed rather than the bond market, they may make bad decisions in the short term.
The recent increase in mortgage rates tracked rising bond yields.
Rates Will Keep Rising, Experts Say
Economists pointed to the July jobs data released last Friday as an explanation for the rising mortgage rates. And they pointed out that notwithstanding the increase, rates remain historically low.
“Despite the rise, rates remain very low,” said Sam Khater, Freddie Mac’s chief economist.
The historically low rates mean it may be a good time to refinance for millions of homeowners. In fact, last week, MoneyWise estimated that 15.1 million mortgage holders could save an average $298 a month by refinancing.
Khater said strong economic growth will likely continue into 2022, raising mortgage rates further in the process. And that could impact homeowners looking to refinance as well as potential home buyers.
But those rising rates may be offset by other factors, as MarketWatch notes. The listings of homes for sale continue to expand. And that may ease the competition and price pressure facing home buyers due to the housing shortage across the U.S.
While steadily rising rates may make it more costly for homeowners to refinance in the future, a potential rebounding economy offers some consolation.