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Mortgage rates remained relatively unchanged the first week of February. And that should come as a relief to homebuyers, given that interest rates so far this year have hit their highest level since the onset of Covid-19.
The average rate for a 30-year fixed mortgage was 3.55% for the week ending Feb. 3, exactly the same rate as the previous week. Meanwhile, the average rate on a 15-year fixed-rate mortgage fell 3 basis points to 2.77% over the same period, according to Freddie Mac’s Primary Mortgage Market Survey.
Current mortgage rates are at their highest level since March 2020, when the Covid-19 pandemic spread across the country. However, Freddie also attributed the latest “stagnation” in mortgage rates to the impact that Covid-19 and the Omicron variant have had on the economy.
“As the economic recovery continues through the spring and summer, mortgage rates should resume their upward trajectory,” Freddie said in the statement. “Meanwhile, recent data suggests that demand from home buyers continues to be strong while supply remains weak, driving home prices higher.”
That same week, Forbes Advisor also predicted higher home prices due to a historically low level of housing supply, highlighting ways buyers can better position themselves in an incredibly tight and expensive market.
Experts: Mortgage rate growth has slowed, but won’t last long
While Omicron spread rapidly at the start of the year, an unprecedented 7.8 million people were unable to work in January, either because their employer was affected by the pandemic or because than their household was, according to the US Bureau of Labor Statistics. This sharp economic slowdown helped contain mortgage rates after they jumped around 50 basis points between late December and January.
But the recent slowdown in mortgage rates may not last as the recent jobs report is better than expected. Payroll employment rose by 467,000 in January, beating forecasts for an increase of 150,000. A strong labor market coupled with higher inflation will likely drive mortgage rates higher in the coming months, experts say .
“Inflation is at its highest level in 40 years, and strong job creation and rising wages will not tame price pressures,” said Lawrence Yun, chief economist at the National Association of Realtors (NAR). “That is why the yield on 10-year Treasury bonds is at the highest rate since the start of the pandemic at 1.9%. Mortgage rates will also follow this upward trajectory.
Related: Compare current mortgage rates
Refinance requests have sprung up as mortgage rates rise
Rising rates appear to have prompted borrowers to act, with the number of people looking to refinance their mortgages increasing in the past week. Refinance applications were up 18% from the previous week, according to Mortgage Bankers Association (MBA) weekly mortgage application survey data for the week ending Jan. 28.
“Despite the rate increase, refinance applications increased 18%, primarily due to a 22% increase in conventional applications,” said Joel Kan, associate vice president of economic and industry forecasting at the MBA, in a press release. “There has likely been some recent volatility in the number of applications due to weeks being affected by the holidays, as well as borrowers trying to get refinance before rates rise even further.”
For borrowers who want to lock in today’s interest rates before they rise further, start by looking for lenders with low advertised rates. If you’re refinancing, you don’t have to go back to the same lender who issued your first mortgage; you can shop around which will help you find the lowest rate possible.
Related: Compare current mortgage refinance rates
Keep in mind that the advertised interest rate is only a cost of the mortgage, you will also have to pay closing costs. The best way to get an accurate estimate of the cost of your mortgage is to know your annual percentage rate (APR). If you apply for a mortgage, the lender must give you a loan estimate that includes all fees and the interest rate.