Mortgage Rates Rise to One-Month High on Jobs Report
The average U.S. rate for a 30-year fixed mortgage rose this week to the highest level in a month as the lowest unemployment rate since the start of the pandemic convinced investors the economy was heating up.
The rate rose to 2.87% from 2.77% last week, reversing six weeks of declines, Freddie Mac said in a report on Thursday. The average fixed rate for a 15-year home loan was 2.15%, up from 2.10%, the mortgage financier said.
Rates rose after a report on Friday showed the unemployment rate had fallen to 5.4% in July, the lowest level since March 2020 when U.S. pandemic lockdowns began. Payrolls increased by 943,000, the biggest jump in almost a year, the Labor Department said in the report.
“Following last Friday’s strong jobs report, which revealed broad-based gains in employment and wage growth, mortgage rates are moving higher,” said Sam Khater, Freddie Mac’s chief economist.
Mortgage rates have been bouncing around in a quarter-percentage-point band for the last four months as bond investors vacillate between concern about inflation, after economic reports showed the economy heating up, and worry that a resurgence of the Covid-19 pandemic would chill the nation’s recovery from the steepest recession in more than eight decades.
While rates are higher this week, no major economic forecaster is predicting them to exceed 4% at least through 2022. The average U.S. rate for a 30-year fixed mortgage this year likely will average 3.1%, matching the 2020 average, and rise to 3.7% in 2022, Freddie Mac said in a July 15 forecast.
“Despite the rise, rates remain very low, particularly given that economic growth is strong and will continue into next year,” Khater said.
For the year, the economy is expected to grow at a 6.6% rate, which would be the fastest pace since 1984, Goldman Sachs said in a report to clients on July 26. When the economy is booming, mortgage investors typically demand higher yields to compensate for potential inflation that could ensue, which leads to higher loan rates for consumers.