Mortgage rates are rising dramatically. The days of 2% rates may be over.

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*** SINGLE USE *** Homes in San Francisco, California, United States on Tuesday, September 21, 2021.

David Paul Morris / Bloomberg

Weekly mortgage rates posted their biggest increase since February, according to data released Thursday, and they might not come down anytime soon.

The average rate on a 30-year fixed-rate mortgage climbed to 3.01% this week, from 2.88% last week, Freddie Mac reported Thursday. This is a 13 basis point increase from the previous week and the largest week-over-week increase since the week of February 25.

The increase could slow the rapid appreciation in home prices, which set records in 2021. The median selling price of an existing home was $ 356,700 in August, the National Association of Realtors said earlier this month. this month. This is an increase of 14.9% from the previous year. Year-over-year increases peaked at 23.6% in May.

Soaring house prices have helped stimulate the economy, pumping billions of dollars into the hands of the country’s 83 million homeowners. Many homeowners have taken advantage of low rates to refinance and withdraw money from their homes. Others have seen their mortgage payments drop hundreds of dollars a month after refinancing at lower rates.

Mortgage rates have been at or near historically low levels throughout the Covid-19 pandemic, falling below 3% for the first time in July 2020 and hitting a low in early 2021 at 2.65 %. Rates have exceeded 3% a few times this year. This time around, they’re likely to continue to rise, Freddie Mac said.

“We expect mortgage rates to continue to rise modestly, which will likely impact home prices, causing them to slow slightly after rising over the past year,” said Sam Khater, economist. chief of Freddie Mac, in a statement. The sudden jump was due to a confluence of factors, Khater said. Among them: talks about the Federal Reserve cutting its bond purchases, rising inflation and labor and material shortages, which could be made worse by energy shortages.

The National Association of Realtors also sees mortgage rates continuing to rise. “While rates have been below 3% for the past four months, it looks like rates in the range of 2% are probably over,” wrote Nadia Evangelou, senior economist and director of forecasts for the National Association of Realtors, who attributed the move to 10-year increases in Treasury yields. Bond yields are likely to continue to rise, Barron recently reported.

The jump in rates, while steep, is not unexpected. The most recent forecast from the Mortgage Bankers Association, a trading group, calls for average rates of 3.1% by the end of the year. Freddie Mac’s June quarterly forecast calls for rates to hit 3.4% this year.

While mortgage rates above 3% represent an increase from pandemic lows, rates would still have a way to go before they return to a pre-pandemic standard. The average 30-year fixed rate mortgage was 3.94% in 2019 and 4.54% in 2018, according to data from Freddie Mac.

Write to Shaina Mishkin at [email protected]

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