Following two weeks of declines, mortgage rates edged up, and economists say that consumers should expect further increases over the coming weeks.

The Federal Reserve will likely raise its short-term interest rates at its meeting next week. While the Fed’s benchmark rates do not have a direct effect on mortgage rates, they do often influence them and likely will lead to an increase, the National Association of REALTORS® notes on its Economists’ Outlook blog.

But even though mortgage rates are rising, consumers should bear in mind that rates remain near historic lows. For comparison, in 1982 when inflation was rising roughly at the same pace as it is now, mortgage rates were 16% on average, Nadia Evanelou, senior economist and director of forecasting at the National Association of REALTORS®, writs on the association’s blog. This week, the 30-year fixed-rate mortgage averaged 3.85%, as a comparison.

The latest increase in mortgage rates comes as Treasury yields increase, notes Sam Khater, Freddie Mac’s chief economist. “Over the long-term we expect rates to continue to rise as inflation broadens and shortages increasingly impact many segments of the economy. However, uncertainty about the war in Ukraine is driving rate volatility that likely will continue in the short-term.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 10:

• 30-year fixed-rate mortgages: averaged 3.85%, with an average of 0.8 points, rising from last week’s 3.76% average. Last year at this time, 30-year rates averaged 3.05%.
• 15-year fixed-rate mortgages: averaged 3.09%, with an average of 0.8 points, rising from last week’s 3.01% average. A year ago, 15-year rates averaged 2.38%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.97%, with an average of 0.3 points, rising from last week’s 2.91% average. A year ago, 5-year ARMs averaged 2.77%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront costs of obtaining the mortgage.

©National Association of REALTORS®
Reprinted with permission

As many borrowers continue to emerge from forbearance due to pandemic-related aid, a government watchdog is encouraging lenders to help them avoid a potential foreclosure wave.

The Consumer Financial Protection Bureau says that as of March 1, more than 768,000 mortgage borrowers remain in active forbearance. Many of these consumers are at risk of foreclosure unless they receive loss mitigation assistance from their mortgage servicers, the CFPB says. With that in mind, the CFPB is urging greater distribution of the Homeowner Assistance Fund(link is external) to help homeowners avoid foreclosure. Lenders must work with state housing finance agencies and HUD-approved housing counselors to receive the funding. States have access to $9.961 billion in federal funding as part of the fund, which is intended to help homeowners recover from the impact of the pandemic. Funding is available through the program until Sept. 30, 2025.

The fund is a federal program that provides money to states, tribes, and territories to assist homeowners with housing-related costs. Consumers can use the money to pay their mortgage. This could allow struggling homeowners to enter loan modifications with lower payments. “The CFPB is closely monitoring servicer conduct to ensure that they are complying with all applicable federal consumer financial laws and assisting consumers with resolving delinquencies and preventing avoidable foreclosures,” the bureau said in a statement. “As part of this monitoring, the CFPB will continue its heightened review of mortgage servicing complaints, including in particular complaints about challenges working with servicers to use HAF funds.”

©National Association of REALTORS®
Reprinted with permission

Consumers can expect higher borrowing costs across the board after the Federal Reserve announced it would raise its short-term benchmark rate for the first time in three years, financial analysts say. The Fed increased its target federal funds rate by a quarter of a percentage point Wednesday after it had been near zero. The central bank is expected to increase its rate six more times by the end of the year as it tries to tame the highest inflation in 40 years.

The Fed’s rate—which is the interest rate at which banks lend to one another—often indirectly influences mortgage rates. The rates on long-term fixed-rate mortgages are expected to move higher, and the average 30-year fixed-rate mortgage, which is above 4%, likely will continue to increase, Jacob Channel, senior analyst at Lending Tree, told CNBC.

CNBC offered an example of how that could impact borrowers: On a $300,000 30-year mortgage with a 4% rate, borrowers may pay about $1,432 a month. If that rate rose to 4.5%, that same mortgage would cost $1,572 a month. Financial experts recommend that borrowers with an adjustable rate mortgage refinance into a fixed rate before any further increases.

©National Association of REALTORS®
Reprinted with permission

As mortgage rates rise, levels below 4% for the most popular 30-year fixed-rate mortgage are likely to remain in the rearview mirror. The 30-year fixed-rate mortgage averaged 4.16% this week, Freddie Mac reports.

“The 30-year fixed-rate mortgage exceeded 4% for the first time since May of 2019,” says Sam Khater, Freddie Mac’s chief economist. “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year. While home purchase demand has moderated, it remains competitive due to low existing inventory, suggesting high house price pressures will continue during the spring homebuying season.”

Higher mortgage rates are likely to affect many aspiring home buyers, especially first-timers, says Nadia Evangelou, NAR’s senior economist and director of forecasting, on the association’s blog. Since the beginning of this year, nearly 6.3 million households have been priced out of the housing market, 2 million of whom are millennials.

Freddie Mac reports the following national averages with mortgage rates for the week ending March 17:

• 30-year fixed-rate mortgages: averaged 4.16%, with an average 0.8 point, up from last week’s 3.85% average. Last year at this time, 30-year rates averaged 3.09%.
• 15-year fixed-rate mortgages: averaged 3.39%, with an average 0.8 point, increasing from last week’s 3.09% average. A year ago, 15-year rates averaged 2.40%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.19%, with an average 0.2 point, increasing from last week’s 2.97% average. A year ago, 5-year ARMs averaged 2.79%.
• Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage.

©National Association of REALTORS®
Reprinted with permission

Despite increasing equity, fewer homeowners are taking out home equity lines of credit. A March 18 report from ATTOM Data Solutions shows the number of HELOCs issued in the fourth quarter of 2021 was down 5.5% from the previous quarter, and 4.2% below the level issued in the fourth quarter of 2020.

HELOC mortgage originations fell from the third quarter to the fourth quarter of 2021 in 68% of the metro areas tracked. The largest decreases were in Atlanta (down 36.1%); San Antonio (down 23.3%); Houston (down 19.1%); Austin, Texas (down 18.5%); and St. Louis (down 15.9%).

But homeowners in some locales seem more apt to take advantage of their growing equity and to take out HELOCs in larger numbers.

The largest quarterly increases in HELOCs among metro areas with at least a population of 1 million in the fourth quarter of 2021 were in: Cleveland (up 32.7%); Buffalo, N.Y. (up 24.3%); Raleigh, N.C. (up 21.7%); Philadelphia (up 13.5%); and Detroit (up 10.6%).

A separate study from LendingTree(link is external) analyzed the top motivations for homeowners to reach for their equity. Fifty percent of homeowners seeking a HELOC across 50 metros cited home improvements as their primary reason. Twenty-four percent of homeowners say they would use equity to help consolidate their debt.

©National Association of REALTORS®
Reprinted with permission

Higher home prices are overshadowing potential savings from historically low mortgage rates, according to a new analysis by CoreLogic, a real estate research firm.

“[The] 2020–2021 pandemic housing market recorded the fastest annual home price appreciation in the 45-year history of the index,” Yanling Mayer, principal economist for CoreLogic, writes in a March 18 analysis on the company’s website.

Record-low mortgage rates are often cited as helping to boost affordability in the current market. But how much have low rates helped?

Buyers who financed their purchases using FHA loans, which tend to skew toward first-timers, have seen a rapid rise in typical monthly payments, despite record-low interest rates, Mayer writes. During the second half of 2021, the typical monthly out-of-pocket cost for those using FHA financing was $1,710—up by 19.7% from the rates just before the beginning of the pandemic, CoreLogic reports.

Monthly payments on homes purchased with VA loans posted a double-digit increase as well, jumping 11.3% from pre-pandemic levels, the analysis reports.

However, buyers who have financed their purchases using conventional loans have locked in more savings from lower interest rates. They’ve seen monthly payments rise by 3.3%, or $57 per month, in comparison.

“Many of these home buyers are likely repeat or trade-up buyers who were able to afford a large down payment to obtain a more favorable interest rate,” Mayer writes. “First-time home buyers often use FHA loans for financing lower-priced starter homes, and the surge in starter home prices has inadvertently eroded affordability and contributed to pricing out families who hope to become first-time homeowners.”

©National Association of REALTORS®
Reprinted with permission