One year after mortgage rates reached an all-time lows, rates for 30-year home loans experienced one of the largest hikes in weeks, rising to levels unseen since May of 2020.

The average rate for a 30-year mortgage shot up to 3.22 percent, an increase of 11 basis points from the week before and more than a half-percent higher than this time last year, according to Freddie Mac’s latest lender survey.

“With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise,” Freddie Mac Chief Economist Sam Khater said in a statement. “The impact of higher rates on purchase demand remains modest so far given the current first-time homebuyer growth.”

For the week ending Jan. 6, Freddie Mac’s weekly Primary Mortgage Market Survey reported average rates for the following types of loans:

  • For 30-year fixed-rate mortgages, rates averaged 3.22 percent with an average 0.7 point, up from last week’s 3.11 percent figure and well above its record-low 2.65 percent mark from a year ago. Rates for 30-year loans hit an all-time low of 2.65 percent during the week ending Jan. 7, 2021, according to records dating to 1971.
  • Rates for 15-year fixed-rate mortgages averaged 2.43 percent with an average 0.6 point, up from last week’s 2.33 percent and higher than its 2.16 percent mark a year ago. The all-time low rate for 15-year loans was 2.10 percent set the week ending Aug. 5, 2021, according to records dating to 1991.
  • For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.41 percent with an average 0.5 point, matching its 2.41 percent rate last week and remaining well below the 2.75 percent rate from a year ago. Rates on 5-year ARM loans are still hovering above the record-low 2.40 percent rate set during the week ending Aug. 5, 2021.

The survey results reflect rates for borrowers with excellent credit who put down 20 percent on a home. The average rate factors in the average discount points as well. Borrowers with lower scores, or different point assumptions, can expect different rates.

The dip in mortgage rates follows a general upward trend that’s seen rates for 30-year loans rise from below 2.9 percent before Thanksgiving to their current levels today.

In a separate survey, the Mortgage Bankers Association reported that demand for purchase loans dropped a seasonally adjusted 4 percent compared to two weeks ago.

The mortgage rate increases coincided with a spike in 10-year Treasury yields, which rose sharply after the Federal Reserve released minutes that signaled the central bank eventually intends to offload some of its bonds and mortgage-backed securities.

The news comes as the Fed is actively tapering the support for the American economy it provided throughout the pandemic. And the Fed is likely to shrink its balance sheet faster this time than it did in the aftermath of the 2008 financial crash, the minutes suggest.

The Fed’s current tapering timeline would phase out monthly bond and mortgage-backed securities purchases by March. A timeline for eventually shrinking the Fed’s balance sheet has not been established.

Email Daniel Houston

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