Mortgage Rates Have Risen to Their Highest Level Since November
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Here's your Money Briefing for Friday, February 26th. I'm J.R. Whelan for The Wall Street Journal. The housing market's been on fire since the pandemic began, fueled by mortgage rates that fell to record lows last year, but they are creeping back up.
About 40% of all home sales are made between March and June, so it's really a crucial season.
So what's driving rates higher and where do economists see them going from here? We'll call on our banking and consumer finances reporter Orla McCaffrey for some answers after the break.
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Over the past year, the pandemic fueled a huge demand for homes as people look for more space outside of cities. And from last March to November, mortgage rates were on a pretty consistent downward slide, which helped more buyers and refinancers get in on the action. But the average 30-year fixed rate is ticking back up.
What’s the current headline about mortgage rates and why does it matter?
It's now highest level since November. So what does that mean for buyers, sellers, and the economy as a whole? We've got Consumer Finances reporter Orla McCaffrey on the line to explain it for us. Orla, thanks for being here. So mortgage rates fell for most of last year since the pandemic began and were at record lows for a while. How much have they risen?
So they have risen to about 2.81%, which is their highest level since November. That level is still very low historically. It still makes a lot of sense to buy a home or to refinance right now, but it is a considerable uptick from the lows we saw last year.
So what impact has that had on mortgage applications?
It has put a bit of damper on mortgage applications, both for home purchases and for refinances over the past couple of weeks. Last week, they were down about 11%, which makes sense because when people see rates rise after such a period of like really rock bottom rates, it kind of makes them step back and say, you know, okay, should I wait and watch and see if it goes down again, if I can get a better deal or, you know, maybe I'll just put off my refi in the short term.
Now help us understand how this fits into the larger economic picture. What do rising mortgage rates typically say about the outlook for the economy?
So rising mortgage rates are definitely a sign of investor optimism. And we know that because something called the yield on the 10-year treasury is rising. And that is basically an investment that investors like during times of economic uncertainty and that they kind of tend to stay away from during times when they feel optimistic, which is happening right now. because of improving COVID-19 vaccination rates and expectations that a large federal stimulus bill will be passed here in the coming weeks. Investors, instead of piling into what we call government bonds, which are safe haven assets, they're putting their money instead into more risky assets like stocks because they believe that the economy really is on a path to recovery.
You know, Orla, this has been a home seller's market with average prices up about 10% and the year ended in December.
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