Why The Recent Jump In Rates

Dated: April 16 2021

Views: 225


 

When we last delivered our “Rate Update,” the environment was ultra-low rates. Fast-forward a few months, and the 30-year fixed-rate mortgage has jumped to 3.09% in mid-March from 2.65% in mid-January according to Freddie Mac's survey.

What propelled rates higher? One of the main culprits was the specter of rising inflation fueled by a jump in commodity prices, especially lumber. Food prices globally have risen by 2.4% in February from January, while food prices in the U.S. rose 3% in 2020, double the annual rate of inflation as measured by the Core PCE (1.5%). The price for a barrel of West Texas Intermediate oil has gone from as low as -$40/barrel in April of 2020 to the recent high of $68.

The Fed has also had a hand in the recent rise in rates by letting inflation run hotter and taking a sort of laid-back approach to higher costs.  At the same time, that 10-year break-even rate, a key measure of inflation expectations, is at its highest level since 2014.

Throw in an improving economy, a push for more vaccines, and COVID-19 loosening its grip, and the path of least resistance for rates looks to be higher. But to put it in perspective, even if the 30-year fixed were to rise to 3.5%, it is still historically low. The problem is that many would-be young home buyers only know low rates. 

When educating buyers about the American dream of owning a home, it's important to note that home-borrowing costs remain low, and it's still a good time to buy, sell, or refinance. Yes, rates may creep higher, but so should future wages. Also, homeownership in the long run sees price appreciation and has been a good investment.

Bottom line: It's always a good time to purchase a home, but with rates and inventories low, it is still a great time to jump into homeownership. 

Source: Mortgage Market Guide

Blog author image

Avo Derbalian

Avo Derbalian became Owner/Salesperson of a real estate company in early 2016 after being a Realtor® for a year and a half, providing services all over Bergen County and Passaic County. Since then, ....

Latest Blog Posts

Why The Recent Jump In Rates

  When we last delivered our “Rate Update,” the environment was ultra-low rates. Fast

Read More

Stay Healthy While At Work

Whether you're working from home or back in the office, the workday can often get hectic, leaving little time to take care of yourself. However, your health and-

Read More

A Look Into The Markets From Past Week

This past week, the Federal Reserve held their first meeting of 2021 and shared its thoughts on the economy, inflation, and interest rates. Below are three important

Read More

Top 10 Winter Home Maintenance Tips

1. Check Your Gutters and DrainageWith winter comes increased rainfall, so you want to be ready. While cleaning out the gutter isn’t a fun job, it can save you money in the long run. Well

Read More