Have You Refinanced Yet? Time Could Be Running Out as Rates Begin to Creep Up

Mortgage lenders, home builders, and realtors have been keeping close tabs on bond markets recently, all with a bit of trepidation as rates begin to inch higher.

Last week, U.S. mortgage rates saw the biggest jump in nearly a year, hitting levels not seen since July 2020. This rise occurs on the heels of a surge in Treasury bond yields, which, combined with the growing availability of COVID-19 vaccines, continues to fuel optimism about an economic rebound.

The contract rate on a 30-year fixed-rate mortgage, the most popular U.S. home loan, rose by 0.15 percentage point to 3.23% in the week ended Feb. 26, according to the Mortgage Bankers Association. This is the largest weekly increase since last March and the fourth consecutive weekly rise.

Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said:

“The housing market is entering the busy spring buying season with strong demand. Purchase applications increased, with a rise in government applications – likely first-time buyers – pulling down the average loan size for the first time in six weeks.”

As historic lows have ushered in unprecedented demand from buyers, if rates continue to rise at this pace, buyers won’t be able to afford homes at their current, massively inflated prices, which could deliver a blow to an industry that’s been on fire.

But if more families choose to join the hoards of people fleeing city life, for larger suburban homes, they’ll have no choice but to pony up the cash. And with that kind of financial burden eating up discretionary spending funds, other industries could soon be feeling the pinch of homeowners tightening the purse strings.

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