Mortgage rates are on the move again. This time, they continuing to rise after a long period of historic lows throughout most of 2020. Some lenders are quoting rates that are upwards of a quarter point higher this week compared to last week. A mortgage loan that might have been locked in at 2.75% a week ago may be closer to 3.0% today.

The Impact of Market Volatility

This is obviously a big jump after smaller dips and spikes in recent months. Volatility has returned to the real estate and mortgage markets. We’re used to volatility in the bond market, but the mortgage market has largely been spared as rates remained insanely low for a long time. Mortgage experts expected rates to trend higher as 2021 went on, but this quick move is definitely catching a lot of attention from potential home buyers.

The more aggressive mortgage lenders are averaging rates around 2.875% on top-tier 30-year fixed refinance loans. Less aggressive lenders are hedging their bets with average rates closer to 3.125% on similar 30-year fixed loans.

“Expectations of faster economic growth and inflation continue to push Treasury yields and mortgage rates higher,” says Joel Kan, associate VP of economic and industry forecasting for the Mortgage Banker’s Association. “Since hitting a survey low in December, the 30-year fixed rate has slowly risen, and last week climbed to its highest level since November 2020.”

Decrease in Mortgage Applications

Last week, we saw the total mortgage refinance applications drop 5.1% from the first week in February. Home buyers and homeowners looking to refinance are pulling back with rates on the rise. This is a gamble, of course. They are either waiting for the next dip in rates to make their moves or they may have missed their window to lock in the lowest possible rates. The good news is that mortgage rates are still very low. If you are looking to buy or refinance, you need to weigh your options carefully and time your moves accordingly.

Even though total applications fell last week, refinance applications are still much higher than a year ago (51%). New mortgage applications dropped 6% last week, but are still 15% higher than this time in 2020.

Low Inventory and Rising Home Prices

Meanwhile, home prices continue to soar with the average purchase loan being $412,200. This is largely due to a severe shortage of housing inventory. As mortgage rates go up, however, we may start to see prices leveling out. The markets always have a way of self-correcting. Home buyers this spring may be paying higher interest rates, but they may also be paying a lower purchase price than they would have if rates were still bottomed out. The trade-off tends to happen naturally over time.

So, what does this mean for people looking to refinance or buy a new home now? Just because rates are up from where they were a couple months ago (which we all expected to happen), they are still very favorable. The question is really when you want to take action? If you can still refinance at a lower rate than you currently have or cut down your 30-year loan into a 15-year loan, you may want to take advantage of the rates before they creep even higher. New home buyers may have a little more flexibility with timing, based on prevailing interest rates, home prices and housing inventory.

No matter what your mortgage goals, you always want to do your research and make smart financial decisions when the timing is right. This is why it pays to talk to a mortgage advisor who can review your situation and help you make the best decisions. Contact Transparent Mortgage today to get started.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.