For the first time since December 2019, interest rates hit +4%.
Interest Rates Now 122 Basis Points Higher Than Last Year
For the first time since December 2019, interest rates hit +4.071% for a conforming 30-year fixed-rate mortgage, according to Mortgage Daily News (MDN). Rates are now +122 basis points higher than last year at this time.
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More startling is that interest rates climbed +12 basis points higher in one day last Thursday, February 10. According to CNBC’s Diane Olick, “Interest rates don’t climb +12 basis points in one day.”
The Optimal Blue Mortgage Market Indices indicated that first-time buyers who often have lower credit scores and often have less savings for down payments are likely to pay the highest interest rates averaging at 4.122% for FHA-backed mortgages.
Lenders, on the other hand, were offering discounted rates on jumbo loans averaging at 3.696%.
Federal Reserve May Increase Interest Rates Six Times in 2022
Federal Reserve policymakers have been candid about the possibility of their raising the short-term federal funds rate six times at one quarter of a percentage point at a time during 2022. Adding fuel to their candidness also came on Thursday the 10th when the US Labor Department‘s latest report noted that the consumer price index jumped from 7% in December to 7.5% in January. This +7.5% jump is the largest annual increase in the CPI since 1982.
Impact of Rising Rates on Prices & Sales
Rising interest rates may very well “supercharge” spring’s homebuying season. Mark Fleming, chief economist with First American Financial Corp. said, “While rates are expected to increase steadily throughout 2022, many potential home buyers may try to jump into the market now before rates rise further. The fear of missing out, or ‘FOMO,’ and the potential loss of home-buying power may supercharge the housing market ahead of the spring home-buying season.”
With this jump to 4.071%, CNBC’s Olick said that mortgage payments as of right now are +$250/month more expensive.
First American’s analysis of the potential impact of rising interest rates indicates that house buying power could drop by $52,000 with rates at +4%.
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Other factors at play here include past supply increases in the spring buying season and continuing wage increases but…interest rates tend reflect rate increases on the 10-year Treasury bond prices… as the Fed unloads more bonds, those rates will likely continue climbing. The bottom line? Some of those fence-sitting homebuyers could well find themselves being priced out of homes they could have afforded.
Thanks to CNBC and Inman.
