Despite the sharp increase in mortgage rates, this still marks a great time for potential homebuyers to explore their mortgage options. The weekly survey conducted by Freddie Mac, a government sponsored enterprise which works to provide financing for mortgages, reported that the average rate for a 30-year-fixed mortgage had risen to 3.02% from the previous week's 2.86%.
The current mortgage rate is higher than the year-to-date average of 2.83%. Nonetheless, it is still significantly lower than the 3.63% reported for the same time last year. Thus, while there has been an incline in rates, they remain at levels that are historically low.
A key factor influencing the self-sustaining increase in mortgage rates over the past few weeks is the improving economic outlook. Job gains and transportation activity continue to show signs of resurgence as more and more businesses resume operations. These factors have increased consumer confidence, resulting in a spike in demand for purchase loans for newly built homes.
Higher borrowing costs have also contributed to the rise in mortgage rates. Factors such as inflation, as well as the pending Federal Reserve decision to scale back its bond purchases, have had a positive effect on long-term borrowing costs. In addition, the Biden Administration's proposed infrastructure package has increased the price of Treasury Bonds as investors anticipate its passing and the economic stimulation that would follow.
Despite the incline in rates, there are still plenty of opportunities for individuals who are looking to purchase a new home. Although interest rates have risen, they remain relatively low, allowing buyers to still take advantage of the favorable borrowing conditions available in the market.
In conclusion, the average mortgage rate has risen from last week, yet remains at low levels. The increase can partially be attributed to the improving economic outlook and higher borrowing costs. However, this is still a great time for potential homebuyers to explore their mortgage options, as mortgage rates remain at record-low levels.
This article was contributed on Aug 12, 2023