Mortgage rates, which had been hovering near record lows this winter, turned a corner in February and have gone up for the last six weeks, making home loans steadily less affordable, according to data from the Mortgage Bankers Association. The latest 2-basis-point jump brought the average rate for a 30-year fixed-rate mortgage to 3.28%, a full 43 basis points over its December low, when it was just 2.85%. During the same time span, refinancing applications have declined, but the trend in applications for purchases—a leading indicator of home sales—hasn’t been as steady. While purchase applications are still 12% below their level at the end of January, they have rebounded and regained lost ground over the last three weeks, now 11% above their low logged on Feb. 19. Breon Price, a broker and loan originator at Motto Mortgage Apex in Ohio, said higher rates haven’t had much impact on homebuyers he deals with because competition is fierce for the severely depleted inventory of homes for sale. Having already overcome the sticker shock that accompanies today’s record home prices, few balk at an interest rate that may be slightly over 3%, he said. “The impact that rates have on a person’s interest in buying a home is diminishing,” he said. “Rates were so low anyways, people were shocked at what their payment was going to be at 2.5%. At 3%, it’s still in their comfort zone.” Economists have predicted that the feverish housing market will cool down in the second half of the year in the face of those rising rates. And, indeed, the decline in purchase applications since January points to a slight chill in the air. But there is a tug-of-war between the increasing cost of borrowing and optimism about the economy that’s being lifted by vaccines and the American Rescue Plan relief bill. It’s too soon to count out the upbeat side just yet. “Homebuyer demand this spring is being fueled by the improving job market, rising economic outlook, and ongoing wave of millennial households interested in buying their first home,” said Joel Kan, vice president of economic and industry forecasting at the Mortgage Bankers Association, in an email. “While mortgage rates are likely to move somewhat higher, the purchase market remains on track for a record year,” added MBA’s chief economist, Mike Fratantoni, in a prepared statement.
