This latest increase has brought the average 30-year fixed rate mortgage rate to 3.71%, a 0.08% increase over last week. The 15-year fixed rate mortgage rate is also up, now standing at an average of 3.15%.
The economic upheaval caused by the coronavirus pandemic is at the heart of this latest round of mortgage rate increases. Consumer sentiment has dropped as people have lost their jobs and businesses have closed, causing uneasiness in the stock market. This turbulence has made it difficult to predict the direction of interest rates but, so far, the trend has been upward.
Mortgage lenders have become more cautious as well, instituting stricter credit requirements and making other adjustments to their loan terms. This helps protect them from potential losses resulting from defaults or delinquency, but it can also make it more challenging for borrowers to get approved.
Despite the recent uptick in interest rates, mortgage rates remain quite low compared to historical averages. This is providing some relief to potential home buyers who are trying to take advantage of the current competitive housing market. Low rates are also enabling those with existing mortgages to refinance at more attractive terms, resulting in significant savings over time.
The Federal Reserve has also done its part to keep mortgage rates low in the face of market turmoil. The Fed has kept its target fed funds rate low and bought billions in government bonds every month, increasing the availability of money in the economy and providing a cushion against rising mortgage rates.
For now, it appears that mortgage rates will remain low and affordable for the foreseeable future. Despite occasional spikes, the overall trend is expected to be downward in the long term. Those in the market for a home or looking to refinance should take advantage of these favorable conditions while they last.
Analysis:
Mortgage rates have risen once again, but this increase has kept them below the historical average. This is providing some relief to potential home buyers, enabling them to take advantage of a competitive housing market, and allowing those with existing mortgages to refinance their loans at more attractive terms. Nevertheless, lenders have grown more cautious, instituting stricter credit requirements and other adjustments to their loan terms, resulting in additional hurdles for borrowers.
The economic disruption caused by the coronavirus pandemic has been at the heart of this latest round of mortgage rate increases. People have lost their jobs and businesses have been forced to close, leading to a drop in consumer sentiment and turbulence in the stock market. This has made it increasingly difficult to predict the direction of interest rates.
The Federal Reserve has responded to this uncertainty by keeping its target fed funds rate low and buying billions of dollars worth of government bonds each month. This has increased the availability of money in the economy, providing a cushion against rising mortgage rates and helping to keep them low and affordable for the moment.
For now, it appears that mortgage rates will remain low and accessible for home buyers and refinancers alike. Despite the occasional spike in interest rates, the overall trend is expected to be downward in the long term. Those in the market for a home or looking to refinance their loan should take advantage of the present favorable conditions while they last.
This article was contributed on Dec 05, 2023
