Follow Mortgage Rates

Since the beginning of 2022, we have seen mortgage rates tick up with quick velocity. In fact, mortgage rates have ticked up near a quarter-percent in the first month of the year. With this significant rise in mortgage rates in just a few weeks, the real estate data that is released has more weight each time. Each week, Freddie Mac releases a Primary Mortgage Market Survey that tracks the mortgage rates. According to the latest release of this survey, mortgage rates have creeped up to 3.55%. What makes this number important is any increase in mortgage rates decreases buying and borrowing power. Higher rates coupled with higher real estate prices might spell disaster for many first-time home buyers. Here is how to follow mortgage rates, and why you should.

Where To Follow Mortgage Rates

Many people who are on the verge of buying their first home might be unpleasantly surprised when they are priced out of the market. Not only have home prices soared in the past year, but mortgage rates have also ticked up since hitting all-time lows in 2021. While it is difficult to tell exactly where mortgage rates are going to end up, there are many great indicators available. One of the greatest indicators of mortgage rates is looking at the 10-year treasury yield on websites like Investing.com. Most everyday people will not understand the mechanics of the treasury yield, as they are a complex economic indicator that deserve entire companies dedicated to tracking them. However, there is a strong correlation between how the 10-year yield moves in accordance to mortgage rates. Over the last five decades, treasury yields have been an indicator of where mortgage rates will end up.

This correlation does not look to change anytime soon. As the new year has came and is already a month in, the 10-year treasury yield has led mortgage rates. As the treasury yield has started to tick up near the bottom, rates have been impacted. The treasury yield spent most of 2020, and all of 2021 and 2022 below 2%. However, for those who follow the bond and equities markets, they realize how key this 2% level is. With yields approaching 2%, look for mortgage rates to tick up further into the end of the year. Last week, the 10-year yield was hovering around 1.81%. With mortgage rates hovering around 3.55%, the average spread from yield to mortgage is in place. The spread, historically at 1.7%, is at 1.74% now.

What Higher Mortgage Rates Mean

With rates on the rise, even a moderate rise will dramatically impact buyers. As rates increase alongside home prices, affordability will get crunched. These rate increases impact your mortgage payment monthly, and this impacts the overall affordability of homes. For those potential first-time homebuyers, or buyers in general, rising rates should incentivize you to act soon. There are many potential buyers who are waiting for inventory to increase, however, waiting to buy will cost you. Even sellers are going to lose money and realize the cost of waiting, as rates do not hide from anyone.

However, there is good news for real estate buyers and sellers. Even with rates climbing to levels we haven’t seen since the beginning of the pandemic, they are still historically low. In fact, there are significantly below the decade average. Not only are they 25% below the average of this decade, but they are less than half of decade averages of the past 5 decades. These historically low rates are still worth taking advantage of, especially as home prices increase alongside them.