Understanding the Rise in Mortgage Rates

Understanding the Rise in Mortgage Rates

Every Thursday, Freddie Mac releases the results of their Primary Mortgage Market Survey which reveals what has been happening in mortgage rates over recent weeks. Last week saw an increase across all loan types as 10-year treasury yields reached its highest point since June! With such news on behalf from Chief Economist Sam Khater: “Mortgage rates rose across all loan types this week as we head into a number of important upcoming milestones for economic data release later this month."

Why the 10-year U.S Treasury yield is important to note is because it has been closely linked with mortgage rates over many decades--here's a graph showing that relationship:

2021 has shown consistentency throughout the year.  See graph below.

The Mortgage Rate Increase Is a Sign of Turbulence

The graph also reveals the most recent jump in mortgage rates was preceded by an increase in the 10-year Treasury rate (called out by red circles). This is not surprising considering there are several factors that impact yield such as interest rates, inflation and economic growth.

What Does This Mean for You?
Since there are currently concerns about inflation and economic growth due to the pandemic, mortgage rates have been going up. Khater from Freddie Mac says that while this might not seem like a lot on paper-it could really add up in your home's value!

“Don't panic! The National Association of REALTORS forecasts that mortgage rates will reach 3.5% by mid-2022, but this is still historically low and a great compromise for those who want stability in their finances."

Bottom Line:

Mortgage rates are always a hot topic. As Mark Fleming, Chief Economist at First American once quipped: “You know the fallacy of economic forecasting? Don't ever try and forecast interest rates or mortgage loans because you will invariably be wrong."
That being said if you're either buying your first home or thinking about moving up in order to better suit your needs for a larger space, then keep abreast with what's happening around here - especially as far as those pesky mortgages go! It may very well impact how easy (or not) such an investment turns out, so stay alert regardless.

Post a Comment