The average mortgage rate for a 30-year fixed loan rose 5 basis points last week to 3.02%, marking the first time since July that the industry has seen rates break above 3%, according to Freddie Mac’s Primary Mortgage Market Survey.
Since reaching a low point in January, mortgage rates have risen by more than 30 basis points as the economy works to recover, and according to Sam Khater, Freddie Mac’s chief economist, the impact on purchase demand has been noticeable.
“While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic,” Khater said. “However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”
After an arctic storm left purchase applications sluggish, mortgage activity bounced back last week almost immediately despite rising rates.
“The housing market is entering the busy spring buying season with strong demand,” Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting, said. “Purchase applications increased, with a rise in government applications – likely first-time buyers – pulling down the average loan size for the first time in six weeks.”
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Throughout the pandemic-induced recession, now a year old, the Federal Reserve has stated that the housing market has been one of the only persistent bright spots. However, much of that strength has piggybacked on the industry’s historically low interest rates, and left some economists worried that the rapid rise in Treasury yields in the last several weeks risk choking off that activity.
The 10-year U.S. Treasury note, a heavy-hitter in the swing of mortgage rates, has risen by half a percentage point since January, now teetering near 1.4%.
However, Logan Mohtashami, HousingWire’s lead analyst, sees this as push in the right direction.
“Last year I talked about how the 10-year yield should stay at a range between 1.33% and 1.60% in 2021,” Mohtashami said. “If we couldn’t do this, something terrible happened with the vaccination process. After we closed above 1.33%, the yield rocketed toward 1.60%; we are in a range between these two levels right now. We are no longer in a recession; this is where the 10-year yield should be.”
