Climbing mortgage rates are sign of new reality

WASHINGTON — Where will mortgage rates be a year from now?

A new reality is setting in on the housing market, with mortgage rates going up. There is a reality check that goes along with that, too: Rates are still very low.

Even so, the pace at which mortgage rates have risen is startling. Before the election, 30-year fixed-rate mortgages were averaging about 3.5 percent. In the weeks since, 30-year rates have jumped above 4 percent for the first time in a year.

One expert anticipates them to be around 4.5 percent this time next year.

That number is “a little higher than what I had projected earlier,” said Lawrence Yun, chief economist at the National Association of Realtors.

“The rate increase since the election has risen much faster than expected,” he said.

A half-percent increase from where current rates are would add about $100 a month to the payment on a $400,000 mortgage.

In theory, mortgage rates could move lower again, but that probably would not be a good sign at this point.

“If the economy was to falter and possibly head into a recession, then interest rates would go down, but they’d be going down for the wrong reason,” Yun said.

The average rate on a 30-year fix is now 4.08 percent, according to Freddie Mac. While that is up sharply from just a few weeks ago, it is also about where rates were at the beginning of 2016, when 30-year rates averaged 3.97 percent.

The record low for 30-year rates was in November 2012, at 3.31 percent.

This content was republished with permission from CNN.

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up