If you are looking for a home and are not yet stuck on a mortgage rate, this home has just gotten more expensive.

The average interest rate on the popular 30-year mortgage hit 3.64% Monday morning after rising sharply last week. The rate was 3.5% on Friday and 3.29% on Monday.

The real jump came mid-week when the Federal Reserve announced that it had ditched mortgage-backed bonds earlier than expected. Bond yields also rose on news that the Omicron variant of the coronavirus could rise, then moderately quickly and with much weaker symptoms than previous types, economic activity could pick up quickly. The mortgage rates follow the 10-year yield on the government bond.

“The groups sold at the highest price in at least 9 months last week, thanks to a combination of fed pivot and paradoxical optimism from Omicron,” wrote Matthew Graham, chief operating officer of MND. “The issuance of corporate bonds and the issuance of emerging market government bonds has increased sales sentiment.”

Increasing the current interest rate will cost potential buyers dearly. For a mid-range home, currently around $ 350,000, buyers who now hit 20% will see a monthly payment of $ 125 more than three weeks ago. For those who take advantage of low installment loans, the monthly increase will be even greater.

Mortgage rates have not been as high since the pandemic started in early 2020. Interest rates then rose briefly, for about three weeks, and then continued their pre-pandemic decline, hitting more than a dozen lows by the beginning of winter. This coincided with a huge surge in housing demand due to the pandemic, which resulted in a surge in home purchases.

In 2021 prices hovered in a narrow range but remained relatively low, which put additional pressure on demand and soaring house prices. The only thing holding back buyers was chronic supply weakness.

Higher interest rates could push home prices down as buyers hit the limit of affordability. However, what is currently driving prices up sharply is the high demand for living space. Investors use mortgages less often.

As the demand for new homes increases, inventory levels at large construction companies like D.R. Horton, Lennar, and Toll Brothers all back in 2022. You tend to react quickly to strong, two-way movements. Manufacturer analysts were relatively strong in the sector, citing strong fundamentals. Now, however, they seem to be rethinking.

“Overall, we expect the group (automakers in particular) to be held captive by interest rates and the emerging power cycle, and we will be more vigilant as the year progresses on a note to investors. Monday.

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