The average rate on 30-year fixed mortgages surged over 3% this week, hitting that benchmark for the first time in seven months.
The rise in rates isn’t a surprise. With expectations that the economy will start to recover and the potential for increasing inflation, many experts see mortgage rates rising in 2021.
However, it’s important to note that even with the recent rate growth, both mortgage and refinance rates remain historically low. As recently as May 2019, rates were over 4%, so many homeowners still have the opportunity to save with a mortgage refinance or purchase a new home at a low rate.
Here’s what rising rates might mean for you.
Rates have surged 0.37% from an all-time low of 2.65% in early January and now sit at 3.02%, according to Freddie Mac. For someone taking out a $250,000 30-year mortgage, this increase in rates would add about $49 to your monthly payment and cost roughly $17,800 more in interest over the life of the loan.
Mortgage interest rates aren’t expected to continue to rise at this rate. “The rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks,” Freddie Mac chief economist Sam Khater said in a statement released yesterday. So don’t expect to see the real estate market turn into a buyers market anytime soon.
This rapid increase in rates has been driven, in part, by rising long-term Treasury bond yields, which topped 1.5%. “Interest rates have been volatile recently, with the benchmark 10-year Treasury increasing about 50 basis points from where it was at the start of the year,” Freddie Mac deputy chief economist Len Kiefer wrote in an email. And that has put pressure on mortgage rates, which historically have moved in tandem with 10-year Treasury bond yields.