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Mortgage rates rise amid growing concerns about inflation

The average 30-year fixed-rate mortgage rose to 3.09 percent driven largely by inflation. (Gene J. Puskar/AP)
4 min

Mortgage rates are continuing to climb, according to data by Freddie Mac released Thursday, driven largely by rising inflation resulting from high demand and shortages of goods across the economy.

The 30-year fixed-rate average rose to 3.09 percent with an average 0.7 point, up from 3.05 percent last week and 2.80 percent a year ago. (A point is a fee amounting to 1 percent of the loan paid to a lender that is in addition to the interest rate.)

The 15-year fixed-rate average increased to 2.33 percent with an average 0.7 point, up from 2.30 percent a week ago. It was 2.33 percent a year ago. The five-year adjustable rate average nudged down to 2.54 percent, with an average 0.3 point, from 2.55 percent a week ago. It was 2.87 percent a year ago.

Mortgage rates have been at historic lows — dipping periodically to below 3 percent — since the Federal Reserve last year began purchasing $120 billion a month in Treasurys and mortgage-backed securities to keep the economy strong during the pandemic. But those days could be numbered with the Fed announcing that it will taper those purchases and raise interest rates soon to curb inflation.

Inflation in the United States has reached a 13-year high of 5.4 percent annually, according to the government, evidenced by higher prices for homes, cars, energy, food and other goods.

“The economy continues to grow, inflation is running hot, and the Federal Reserve is about to begin paring their bond purchases that have helped keep mortgage rates low,” said Greg McBride, senior vice president and chief financial analyst at

“Inflation is really going to be the key ingredient going forward,” McBride said. “If inflation is stubbornly high, mortgage rates will go up. If inflation is transitory, it will keep a lid on mortgage rates.”

“Mortgage rates continued to rise this week due to the trajectory of both the economy and the pandemic,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Even as the availability of existing homes is improving, prices remain high due to home buyer demand and limitations on housing starts and permits resulting from the ongoing labor and material shortages. Despite these countervailing forces, we expect the housing market to remain strong as we head into the end of the year.”

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The National Association of Realtors (NAR) on Thursday reported that the median existing-home sales price climbed 13.3 percent to $352,800 from September 2020 to September 2021. Moreover, existing-home sales increased 7 percent in September after having dipped in August.

“Some improvement in supply during prior months helped nudge up sales in September,” Lawrence Yun, NAR’s chief economist, said in a statement. “Housing demand remains strong as buyers likely want to secure a home before mortgage rates increase even further next year.”

The Mortgage Bankers Association (MBA) is forecasting that the 30-year fixed rate will increase to 3.1 percent by the end of 2021 and 4.0 percent by the end of 2022.

“With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022,” Mike Fratantoni, MBA’s chief economist and senior vice president for research and industry technology, said in a statement. “Mortgage lenders and borrowers should expect rising mortgage rates over the next year, as stronger economic growth pushes Treasury yields higher.”

Meanwhile, new mortgage and refinancing applications dropped 6.3 percent last week, according to the MBA. The purchase index decreased 5 percent and the refinance index fell 7 percent from the previous week. Refinancing represented 63.3 percent of all the applications, down from 63.9 percent the previous week.

“Refinance applications declined for the fourth week as rates increased, bringing the refinance index to its lowest level since July 2021,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.

“Purchase activity declined and was 12 percent lower than a year ago, within the annual comparison range that it has been over the past six weeks,” he added. “Insufficient housing supply and elevated home-price growth continue to limit options for would-be buyers.”

One result of that, according to the MBA, is year-over-year loan applications for newly constructed homes fell 16.2 percent in September. The group attributes the decline to higher building material costs and labor shortages, which drove up home prices.