Mortgage rates rise, but remain under 3%. Rates rose 1 basis point to 2.98%, per Freddie Mac's PMMS
For the second consecutive week, mortgage rates managed to hold steady below 3%, rising one basis point last week to 2.98%, according to Freddie Mac’s Primary Mortgage Market Survey.
In light of the rising COVID-19 caseloads globally, U.S. Treasury yields stopped moving up a month ago and have remained within a narrow range as the market responds to incoming economic data, noted Sam Khater, Freddie Mac’s chief economist. While traders typically become hesitant ahead of economic speeches from the Federal Reserve, the FOMC once again did not change its stance on inflation and asset purchases, despite forward economic recovery.
Overall, Fed purchases helped to drive mortgage rates and other loan interest rates to the lowest level on record in 2020 by boosting competition for bonds, which compresses yields.
“The good news is that with rates under three percent, refinancing continues to be attractive for many borrowers who financed before 2020,” Khater said. “But, for eager buyers, especially first-time homebuyers, inventory continues to be extremely tight and competition for available homes to purchase remains high.”
With mortgage rates continuing to hover nearly 30 basis points lower than they were a year ago, competition is getting fiercer than ever.
The latest S&P CoreLogic Case-Shiller Home Price Index report showed a 12% annual gain in February, up from 11.2% in January and the ninth straight month of increasing prices. Heightened lumber costs aren’t helping: the National Association of Home Builders reported lumber prices have tripled over the past 12 months and have caused the price of an average new single-family home to increase by $35,872 — up from the NAHB’s calculated $24,000 extra HousingWire reported back in February.
However, after last year’s record $3.83 trillion in mortgage originations, the MBA forecasts volume to fall 14% this year to $3.28 trillion, which would still be the third-highest total on record. Mortgage rates are still lower than they were a year ago, MBA chief economist Mike Fratantoni said, and while they will likely get high enough to create a flip in the amount of borrowers refinancing versus purchasing, they won’t reach a peak that would be harmful to purchase originations.
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