Federal Reserve Chairman Jerome Powell sees no good reason why average 30-year mortgage rates jumped over the 3% line last week, to the highest level since mid-June.
Rates have been keeping pace as interest on Treasury bills soared due to fears that a recovering economy will fuel inflation. But Powell told members of Congress that inflation is still “smooth” and that the road ahead for the economy is “highly uncertain”.
Will your collateral help to reduce mortgage rates? Experts say borrowers who want to be protected should block one of today’s mortgage rates – because they could go higher.
What’s going on with mortgage rates?
Within weeks of dropping to all-time lows, mortgage rates suddenly came back in full swing. On Monday, Mortgage News Daily had 30-year fixed-rate mortgages averaging 3.10% – an increase of 2.86% on Friday, February 12, before President’s Day weekend. .
For borrowers, “it’s time to wake up,” writes Matthew Graham, MND director of operations.
Mortgage rates tend to track the yield (interest) on the 10-year Treasury bill, which has skyrocketed to places not seen in almost a year. Analysts say the increase is a reflection of investor fears that the vaccines COVID and new stimulus checks will help to heat up the economy very fast and increase inflation.
The Fed’s Powell doesn’t seem too concerned about that.
“After large drops in the spring, consumer prices rebounded partially over the rest of last year. However, for some of the sectors that were most adversely affected by the pandemic, prices remain particularly low,” he told members of the Bank’s Banking Committee. Senate on Tuesday.
The Fed chief says inflation remains below 2% – the central bank’s target. And while things are expected to improve later this year, “the economic recovery remains uneven and far from complete, and the road ahead is highly uncertain,” Powell said.
Powell’s testimony may not have much impact
Despite the president’s soft words, the bond market does not seem willing to ignore the risk of inflation. The 10-year Treasury’s yield has changed little during and after its deposition – and this is probably not useful for potential borrowers who expect mortgage rates to approach record lows again.
“It’s starting to look like last week’s increases in mortgage rates may persist,” he writes Peter Warden, editor of The Mortgage Reports website. “They may not have much more to climb. But it is currently difficult to see why they should retreat significantly soon.”
Here is a reality check, if you are thinking of buying a house or refinance an existing mortgage and I think the 30-year mortgage rates at 3.10% are very high and worth waiting for: 10 years ago, rates were on average close to 5%, according to mortgage giant Freddie Mac. 20 years were over 7%.
Given the risk that rates will rise further, Warden is recommending that his readers lock in a rate now, regardless of whether they have a loan that closes in seven or 60 days.
To find the lowest rate available in your area and for a person with your credit score, you need to research and compare various mortgage offers. More than one study found comparing at least five loan offers can save you thousands of dollars over time.
Dust those price comparison skills when it’s time to buy or renew home insurance. Get rate quotes from multiple insurers and you’re likely to find a lower price on the coverage you need.