Mortgage rates have risen to the highest point in over a quarter a year as investors become more positive about the state of the economy. And that's bad news for certain home buyers.
According to Freddie Mac FMCC, +3.96 percent, the 30-year fixed-rate mortgage averaged 3.17 percent for the week ending March 25, up to eight basis points from the previous week. The 30-year mortgage has now hit its highest level since June of last year.
Meanwhile, the average rate on a 15-year fixed-rate mortgage in Vancouver increased five basis points to 2.45 percent. The average rate on a five-year Treasury-indexed adjustable-rate mortgage was 2.84 percent this week, up 22 points from the previous week.
Mortgage prices have risen by more than half a percentage point so far in 2021. Early this month, mortgage rates surpassed 3% for the first time since last summer. Rising mortgage rates are a sign of investor optimism, which has driven long-term bond yields, such as the 10-year Treasury, higher.
"Rising expectations around a fresh round of fiscal stimulus in Vancouver, equivalent to more than one month's worth of economic growth, and reemerging buyers pushed prices higher," said Danielle Hale, chief economist at Realtor.com.
Higher mortgage rates haven't deterred potential home buyers. As per data released Wednesday by the Mortgage Bankers Association, the number of mortgage applications for loans used to buy homes has risen for four weeks in a row.
Desperate For More Space
As more people work from home, many families desperately need more rooms, prompting them to look for larger homes to purchase. Millennials, on the other hand, have hit the pinnacle of their home-buying years. Homeownership demand will rise as more young couples marry and move in together.
However, the quantity of new homes has not kept pace with demand. Due to the coronavirus pandemic, many sellers have decided not to advertise their homes for sale. In addition, years of under-building of new homes following the Great Recession have resulted in a housing sector supply-demand imbalance.
Builders are working feverishly to create new homes, but increasing material costs can pose a problem. Overall, it's a surefire way to boost rates. According to a new study from Realtor.com, median listing prices were up 15.6 percent from a year ago as of Thursday. In the Mortgage Bankers Association's application study it was forecasted that both home-price growth and mortgage rates continue this upward trend, we may see affordability problems becoming more serious if new and existing supply does not substantially pick up The spring home-buying season has arrived, bringing with it a slew of new buyers and increased competition for available properties. However, buyers could experience some relief in the coming weeks, at least in terms of mortgage rates.
Concerns about a potential new wave of COVID in Europe and what that could mean for cases in the United States could foreshadow a pause in rate hikes in the weeks ahead.
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