Mortgage Rates Hit A Three-year High

Costs have risen sharply in the housing market due to supply shortages and rising demand during pandemics associated with the migration of Americans.

Photo: John Minchiro / Associated Press March 24, 2022 4:31 pm ET update

Homebuyers and owners face the highest mortgage rates in three years. This is a rapid rise and could cool the fierce housing market.

According to mortgage lender Freddie Mac, this week’s average 30-year fixed mortgage rate rose to 4.42%, up more than a quarter percentage point from a week ago and more than a point from the beginning of the year. Other companies tracking mortgage costs have fixed average rates even higher.

Borrowing costs are rising overall as the Federal Reserve raises benchmark short-term interest rates and raises a smaller number this year. Central banks are trying to slow the pace of inflation, which has been at its highest level in decades.

After the pandemic urged the relocation of Americans, supply shortages and rising demand caused costs to rise sharply, especially in the housing market. However, higher mortgage rates may increase the monthly cost of buying a home with a mortgage, and some homebuyers may withdraw from the market.

In the past few months, rising interest rates have boosted monthly mortgage payments by more than 10% from a year ago, according to Freddie Mac. The pattern is similar to the mid-2000s when the Fed was also raising rates.

Higher rates also encourage many homeowners to reconsider refinancing. According to mortgage data company Black Knight Inc, only 2 million homeowners with strong financial profiles stood to save money from refinancing. This has decreased by 80% since the beginning of the year.

US home prices hit record highs in 2021, but these rises are expected to slow in 2022 thanks to a number of economic factors. This is what drives the housing market and shows what it means for future buyers and sellers. Photo: George Frey / Bloomberg News

Write to Ben Eisen ([email protected])