Mortgage rates have climbed past 3% for the first time in over two months, according to Freddie Mac's latest weekly Primary Mortgage Market Survey.
Economists expect rates to continue to go up amid elevated inflation and signals from officials that the Federal Reserve may raise interest rates sooner than earlier projections.
"Mortgage rates have risen above three percent for the first time in ten weeks," said Sam Khater, Freddie Mac’s chief economist. "As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year. For those homeowners who have not yet refinanced – and there remain many borrowers who could benefit from doing so – now is the time."
The average rate for a 30-year fixed-rate mortgage hit 3.02%, up nine basis points from last week's 2.93%. Rates for 15-year mortgages averaged 2.34%, up 10 basis points from the 2.24% average from the previous week.
Meanwhile, the average rate for a 5-year Treasury-indexed hybrid adjustable-rate only saw a slight rise, from 2.52% to 2.53%.
The news comes on the heels of Fed officials suggesting a willingness to raise interest rates sooner than a previous 2024 projection, amid spikes in both growth and inflation as the U.S. economy recovers from the impacts of the coronavirus pandemic.
At the end of 2020, a dozen Fed policymakers speculated that crisis-level interest rates would need to remain in place until 2024. But seven officials present at the central bank's policy meeting last week expressed support for raising the overnight policy rate above its present near-zero level sometime next year.
The rise in mortgage rates comes as existing home prices hit record highs last month amid an ongoing nationwide housing shortage that began in 2020, but sales have tapered off in recent months. With many prospective homebuyers already fatigued from competing for the limited inventory available, an increase in mortgage rates could push even more out of the market.
"Buyers are running out of steam," Realtor.com Senior Economist George Ratiu told MarketWatch. "Without additional supply, favorable financing remains a one-legged stool trying to provide a wobbly foundation for sustainable growth."