Mortgage rates see highest weekly increase since the 1980s

Average 30-year mortgage rate nears 6%

Mortgage interest rates rose by the highest weekly increase since the 1980s, according to Freddie Mac.  (iStock)

Mortgage rates surged last week, with one loan term increasing at a level not seen since 1987, according to the latest data from Freddie Mac.

The 30-year fixed-rate mortgage increased to 5.78%, up from 5.23% last week and 2.93% last year, according to Freddie Mac’s Primary Mortgage Market Survey. Other mortgage lengths also increased — the 15-year mortgage rose to 4.81%, up from 4.38% last week and 2.24% last year. And the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) rose to 4.33%, up from 4.12% last week and 2.52% last year. 

"Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987," Freddie Mac Chief Economist Sam Khater said. "These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. 

"Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market," Khater said.

If you want to buy a home or refinance your mortgage amid today’s rising interest rates, using a marketplace to compare different lenders can help you get the best rate available to you. You can visit Credible to find your personalized interest rate without affecting your credit score.

Rising inflation pushes interest rates higher

In an attempt to combat rising inflation, the Federal Reserve announced last week that it would raise interest rates by 75 basis points, the largest rate hike since 1994. Prior to that, the Federal Reserve raised interest rates by 50 basis points in May and by 25 points in March. And more rate hikes from the central bank are likely on the horizon.

"Climbing mortgage rates continue to put pressure on the housing market, pushing the cost of homeownership ever higher," Economic Research Analyst Hannah Jones said last week. "Although rates tracked by Freddie Mac remain in the 5s, other mortgage surveys showed interest rates exceeding 6% early this week in response to inflation data which increased to 8.6% in May. 

"This represents a 40-year high, with the biggest contributors being food, shelter and gasoline," Jones continued. "There has been little relief for American consumers at the grocery store, the pump, and in both the for-sale and rental markets. 

"The median list price for a home in the U.S. was $447,000 in May, up 18% since May 2021, and mortgage rates rose more than two percentage points in the same timeframe," she concluded. "This means that it is about 65%, or $820 a month, more costly to finance 80% of the median-priced U.S. home now than it was in May 2021."

If you are interested in taking advantage of interest rates before they move higher, you could consider refinancing your mortgage loan to save money on your monthly payment. Visit Credible to compare multiple mortgage lenders at once and find the one with the best rate for you.

Thousands can still benefit from a mortgage refinance, data shows

While the number of homeowners who could benefit financially from refinancing is shrinking amid rising mortgage rates, data shows that there are still many for whom this remains a viable option.

The number of high-quality refinance candidates shrank to 472,000 after last week’s rate increase, according to data from Black Knight. This is the smallest number of homeowners who could benefit from refinancing since 2000. Although rates are rising, changing the terms of a loan could still lower its monthly payments. 

"Refinancing would extend their terms out to 30 years again, which results in excess monthly savings," Black Knight stated. "It reflects more the impact of the term extension savings than rate-specific savings at this point and explains why the population is at a record low, but the savings are not."

The average savings among those who benefit came to about $309 per month, according to the data. And for more than half of those who could benefit, their savings would total between $100 to $300 per month.

Black Knight defines refinance candidates as 30-year mortgage holders with a maximum 80% loan-to-value ratio and credit scores of 720 or higher, who could shave at least 0.75% off their current first lien rate by refinancing.

If you are interested in seeing if refinancing could help you save on your monthly mortgage payment, you can contact Credible to speak to a home loan expert and see if this is the right option for you.

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