US 30-year mortgage rates rebounded this week, after remaining unchanged for three weeks. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 2.81 percent for the week ending February 18, 2021 (the highest level since mid-November), up from last week when it averaged 2.73 percent. A year ago at this time, the 30-year FRM averaged 3.49 percent.
Over the same period, the report also showed the 15-year fixed-rate mortgage averaged 2.21 percent, up from last week when it averaged 2.19 percent. A year ago at this time, the 15-year FRM averaged 2.99 percent.
In this context, Sam Khater, Freddie Mac’s Chief Economist noted “Economic spending has improved, due to the most recent stimulus, but supply chain shortages are causing downstream inflation, leading to higher mortgage rates. While there are multiple temporary factors driving up rates, the underlying economic fundamentals point to rates remaining in the low 3 percent range for the year.”
US 30-year mortgage rates have steadily declined since mid-2018 and reached record low levels in late 2020. However, the recent spike in Treasury yields — partly explained by stronger growth and inflation prospects — could mean that the bottom is now behind us.
The sharp decline in borrowing costs has supported the housing industry boosting both transactions and prices. According to NAR’s latest quarterly report, the national median existing single-family home price rose 14.9% percent on a year-over-year basis. That was the biggest surge in data going back to 1990.
In the short term, the recent jump in mortgage rates appears contained and is unlikely to change the bullish trend in housing prices. Downward pressure on housing supply should persist at least until mid-year given that, earlier this week, President Joe Biden extended the foreclosure moratorium and mortgage forbearance through the end of June as part of his efforts to address the economic impact of the coronavirus pandemic.