The record low interest rates of last winter—the average 30-year mortgage rate hit an all-time low of 2.85% in December, by the association’s measure—fueled a frenzy of real estate purchases as well as refinancing activity, but the appeal of refinancing is much more vulnerable to higher rates, said Richard LaNasa, president of Angel Oak Home Loans, an Atlanta-based lender. While refinancing started to drop off as soon as rates crossed 3%, prospective homebuyers aren’t likely to be deterred by the uptick, he said. “As soon as rates go into the 3.15s, three-and-a-quarters, people are so used to hearing 2s, it will take them some time to adjust,” he said. “The purchase market will stay strong even if rates go into the 4s or 5s.” Many forecasters expect rates to continue to rise in the coming months. The Mortgage Bankers Association predicts the average 30-year to rise to 4% by the end of 2022—just shy of the average over the decade leading up to the pandemic. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.
