U.S. Treasury Yield Surge Might Cause Mortgage Rates to Rise

Americans could be facing higher mortgage rates in the near future. The long-term bond yields appear to be climbing with the expectation of the U.S. investing in Covid-19 vaccinations and stimulus payments. A glimmer of boosting activities has already been seen as the average 30-year-fix-rate home loan jumped from its all-time low of 2.65 percent to 2.79 percent.

Recent sales of previously owned homes have also caused speculation about a rise in mortgage rates. The percentage of sales went up to 26 percent higher than the sales numbers of the previous year. The sales surge left a huge decline in the number of properties available for prospective buyers to obtain.

Prices always rise when the inventory numbers decline, and that’s exactly what happened. The median home price went up 15 percent from the previous year. While these recent market activity changes are hardly enough to declare a disaster for prospective homeowners, it still sparks some questions about their future success in finding affordable housing. It causes current homeowners to question their ability to refinance at a lower rate, as well.

Mortgage Rate Increase Forecasts

Several entities seem to concur with the notion that the mortgage rates will rise in the next year. The Mortgage Banker’s Association believes that the rates will increase to 3.2 percent by the end of the year. The National Association of Realtors’ outlook is more along the lines of 3.1 percent.

Outlook for Prospective Buyers

Prospective buyers will have a more difficult time acquiring homes if the mortgage rates and prices rise as expected. Zillow economist Matthew Speakman voiced a different outlook on the matter. Speakman attributes future mortgage rate rises to the country’s success in containing and treating the Covid-19 virus. He also states that the rising mortgage rates will be contingent upon improvement in the labor markets. He doesn’t foresee rates soaring much higher if those two areas don’t improve. Still, prospective buyers have a right to be a little unnerved about the possible changes.

Contact one of our loan consultants to learn more.