US mortgage rates surge to highest in over 2 years

Feb 11, 2022

(BLOOMBERG) MORTGAGE rates in the US jumped to the highest level since January 2020, before the pandemic rocked financial markets.

The average for a 30-year loan was 3.69 per cent, up from 3.55 per cent last week, Freddie Mac said in a statement on Thursday. That was the highest since Jan 2, 2020, when rates averaged 3.72 per cent.

Borrowing costs resumed their upward climb after holding relatively steady for about a month. They tracked a surge in yields for 10-year Treasuries, which are approaching 2 per cent.

Stubbornly high inflation and an unexpectedly strong jobs report for January are likely to clear the way for the Federal Reserve to lift interest rates, which may make mortgages more expensive.

“The normalisation of the economy continues as mortgage rates jumped to the highest level since the emergence of the pandemic,” Sam Khater, Freddie Mac’s chief economist, said in the statement.

“Rate increases are expected to continue due to a strong labour market and high inflation, which likely will have an adverse impact on homebuyer demand.”

On the other hand, rising rates may have the effect of spurring buyers to jump into the market before costs get even higher. With home prices climbing and inventory at record lows, the challenge will be finding anything affordable.

At the current average for a 30-year loan, the monthly payment on a US$300,000 mortgage would be US$1,379. That’s up from US$1,209 a little more than a year ago, when rates hit a record low of 2.65 per cent.