Mortgage rates rose across the board this week as Federal Reserve policymakers hunker down in the wake of a January jobs report that showed a surprisingly resilient labor market. The average rate on a 30-year fixed mortgage is now 6.55%, up from 6.45% a week ago. Both fixed and adjustable mortgage rates edged higher during the past week.
Here are the current mortgage rates, without discount points unless otherwise noted, as of Feb. 9:
— 30-year fixed: 6.55% (up from 6.45% a week ago).
— 20-year fixed: 6.62% (up from 6.52% a week ago).
— 15-year fixed: 5.75% (up from 5.68% a week ago).
— 10-year fixed: 5.77% (up from 5.73% a week ago).
— 5/1 ARM: 5.38% (up from 5.37% a week ago).
— 7/1 ARM: 5.81% (up from 5.44% a week ago).
— 10/1 ARM: 5.87% (up from 5.86% a week ago).
— 30-year jumbo loans: 6.59% (up from 6.49% a week ago).
— 30-year FHA loans: 5.75% with 0.06 point (up from 5.66% a week ago).
— VA purchase loans: 5.86% with 0.05 point (up from 5.79% a week ago).
[Read: Best Mortgage Lenders.]
“After falling slightly last week, mortgage rates rose sharply this week, erasing some of the progress made on the housing affordability front in the past few months.”
— Orphe Divounguy, senior macroeconomist at Zillow
Mortgage rates increased over the past week on the heels of a stronger-than-expected jobs report on Feb. 3, which triggered “more hawkish recent comments” by Federal Reserve officials, Divounguy says.
Fed policymakers worry that sustained employment growth will continue to push wages higher and make it more difficult to tame rising prices. Although inflation has slowed in recent months, per the consumer price index, it’s still well above the Fed’s 2% annual target.
“A number of Fed officials spoke this week with the same general message: Interest rates must go higher and stay high for a few years in order to ‘kill inflation,'” Divounguy continues. “A stronger-than-expected labor market is the reason given.”
January’s jobs report baffled economists, with the U.S. economy adding 517,000 jobs despite widely reported mass layoffs, mostly concentrated within the technology sector. According to Layoffs.fyi, an independent website that tracks layoff announcements by tech companies, more than 101,000 employees have been laid off since the beginning of the year. Prominent tech giants such as Amazon, Google, IBM, Microsoft and Salesforce have planned to lay off thousands of workers in 2023.
Still, the seemingly resilient labor market isn’t the only indicator that helps forecasters understand the state of the economy. They’ve long warned of a widespread downturn in economic activity as a result of the Fed’s vigorous rate hikes, and some worry that the central bank could go too far in tightening its monetary policy.
“With a slew of leading indicators pointing to a slowing economy, the rapid deceleration of consumer price growth and falling inflation expectations, more aggressive policy tightening could drive the risk of recession higher and pull long-term rates down again,” Divounguy says.
George Ratiu, manager of economic research at Realtor.com, says this tension between economic expectations and real-time data will “permeate financial markets” and continue to dictate mortgage rate trends. He expects that mortgage rates will bounce up and down over the next few weeks, but they should stay within a tight range. In other words, he doesn’t expect rates to reach the peaks seen in October 2022.
[Compare: Mortgage and Refinance Rates in Your Area.]
Indicator of the Week: Buying a Better Rate
With mortgage rates nearly twice as high now as they were just a year ago, more homebuyers are buying discount points to reduce their rate, according to Black Knight’s most recent Mortgage Monitor report.
More than half (57%) of mortgage borrowers who locked in a rate paid at least a half-point during the third week in January, while 44% paid a full point and 23% paid two or more points. For home purchase locks — those who are buying a home rather than refinancing — borrowers paid an average of 1.16 points.
Typically, each discount point a borrower buys costs 1% of the total loan amount and brings down the mortgage rate by 0.25 percentage point. Take this example: Let’s say you’re taking out a $300,000 mortgage at a 6.55% interest rate. It would cost $3,000 to permanently buy your mortgage rate down to 6.3%, or $6,000 for a 6.05% rate. Here’s how a rate buydown could impact your monthly payments and lifetime interest costs on a $300,000 mortgage over the course of 30 years:
| 0 Discount Points | 1 Discount Point | 2 Discount Points | |
| Mortgage Rate | 6.55% | 6.3% | 6.05% |
| Cost of Discount Points | $0 | $3,000 | $6,000 |
| Monthly Principal & Interest Payment | $1,906 | $1,857 | $1,808 |
| Total Interest Paid | $386,189 | $368,491 | $350,990 |
But buying discount points when rates are high can be risky, since you’re essentially betting that rates won’t fall below your locked-in rate in the future. If you would pay $6,000 to buy down a rate to 6.05%, but rates settle below 6% or even 5% during the first few years of your mortgage, you might be better off settling for a higher rate without discount points in the short term and refinancing when mortgage rates dip lower instead.
Of course, it all depends on your unique situation and expectations. Do you plan to sell or refinance your home within a few years, or is this your forever home? How much would it cost to refinance your mortgage if rates fall? If you do decide to purchase mortgage discount points, be sure to find your break-even point — that is, how long it would take for you to save enough money in interest to offset the cost of discount points. And if you’re still unsure of what to do, speak with loan officers at multiple mortgage lenders to explore your options.
[Calculate: Use Our Free Mortgage Calculator to Estimate Your Monthly Payments.]
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Mortgage Rates Rise to 6.55% as Jobs Market Rallies originally appeared on usnews.com
