Mortgage Rates Hit Highest Level Since May 2020

New York, NY, January 7, 2022-U.S. mortgage rates this week rose to their highest levels since May 2020, driving up the costs associated with home buying at a time when home-sales prices are already near record highs, reports the Wall Street Journal. 

“The average rate for a 30-year fixed-rate loan was 3.22%, up from 3.11% last week, according to mortgage finance giant Freddie Mac. A year ago, mortgage rates stood at 2.65%.

“Ultralow interest rates have been a major force in the housing boom of the last two years. Households that kept their jobs and saved money during the pandemic seized on low borrowing costs to buy bigger homes that could accommodate working or schooling from home. Second-home purchases and investor demand for rental properties also surged.

“With the number of homes for sale well below normal levels, buyers have competed in bidding wars, pushing prices to new highs. The median existing-home price rose 13.9% in November from a year earlier to $353,900, according to the National Association of Realtors. That month, the median sales price for newly built homes hit an all-time high.

“Mortgage rates are still low by historical standards, and with strong buyer demand for homes, housing economists don’t anticipate an immediate or significant pullback in home sales. Existing-home sales rose in November to the highest seasonally adjusted annual rate since last January, and 2021 was on track to be the strongest year in home sales since 2006.

“But with the Federal Reserve on course to raise short-term interest rates this year, mortgage rates are likely to accompany them higher, making home affordability an even greater challenge.”

“The average rate for a 30-year fixed-rate loan was 3.22%, up from 3.11% last week, according to mortgage finance giant Freddie Mac. A year ago, mortgage rates stood at 2.65%.

“Ultralow interest rates have been a major force in the housing boom of the last two years. Households that kept their jobs and saved money during the pandemic seized on low borrowing costs to buy bigger homes that could accommodate working or schooling from home. Second-home purchases and investor demand for rental properties also surged.

“With the number of homes for sale well below normal levels, buyers have competed in bidding wars, pushing prices to new highs. The median existing-home price rose 13.9% in November from a year earlier to $353,900, according to the National Association of Realtors. That month, the median sales price for newly built homes hit an all-time high.

“Mortgage rates are still low by historical standards, and with strong buyer demand for homes, housing economists don’t anticipate an immediate or significant pullback in home sales. Existing-home sales rose in November to the highest seasonally adjusted annual rate since last January, and 2021 was on track to be the strongest year in home sales since 2006.

“But with the Federal Reserve on course to raise short-term interest rates this year, mortgage rates are likely to accompany them higher, making home affordability an even greater challenge.”