Photo: James Bombales

Prospective homebuyers just can’t seem to catch a break. According to data released today by Freddie Mac, the 30-year fixed-rate mortgage averaged 3.09 percent this week, the highest level since June 2020.

That’s four basis points higher than the previous week when the average rate was 3.05 percent, and 44 basis points above where things stood at the beginning of the year. A basis point is equivalent to one hundredth of a percent.

Meantime, the 15-year fixed-rate mortgage averaged 2.40 percent, up from 2.38 percent last week and 3.06 percent one year ago. While both mortgage term rates remain well below year-ago levels, rising home prices are eating away at affordability.

“As expected, mortgage rates continued to inch up but are still hovering around three percent, keeping interested buyers in the market,” said Sam Khater, Freddie Mac’s Chief Economist.

“However, residential construction has declined for two consecutive months and given the very low inventory environment, competition among potential homebuyers is a challenging reality, especially for first-time homebuyers.”

The Federal Reserve announced on Wednesday that it would keep its key interest rate near zero through 2023, causing some economists to raise a red flag over potential inflation. While decisions made by the Fed don’t directly affect mortgage rates, they can influence it indirectly by making it more expensive for banks to borrow money from each other.

Financial institutions that offer mortgage products could then pass those increases on to borrowers by way of higher interest rates. If inflation does indeed rise, that will also push mortgage rates higher.

An uptick in mortgage rates combined with supply constraints could cause home prices to reach new highs during the busy spring homebuying season. According to RE/MAX’s national housing report, February’s median home price was $291,000, the highest level in the report’s 13-year history.

That being said, surging home values and vaccination rates could encourage more buyers to list their properties this spring, injecting the market with some much-needed supply.

“Conditions seem to be keeping some potential sellers on the sidelines, but that could change if or when they see more move-up options on the market,” said Adam Contos, CEO of RE/MAX Holdings, Inc. “With seasonality, still-low interest rates, and gains in new construction, we hope to see some relief in supply during the coming months.”

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