Mortgage rates are skyrocketing thanks to the Fed, but buyers who can tough out this difficult, changing market will be rewarded.
The 30-year fixed-rate mortgage averaged 5.27% for the week ending May 5, according to data released by Freddie Mac FMCC on Thursday. That’s up 17 basis points from the previous week — one basis point is equal to one hundredth of a percentage point, or 1% of 1%. Mortgage rates are roughly benchmarked to the yield on the 10-year Treasury note TMUBMUSD10Y . But the difference between the average rate on the 30-year mortgage and the 10-year Treasury has widened recently.
Lenders, consequently, must hike the rates they offer consumers so that they can continue to sell their loans to investors — those sales are what generates the funds used to produce more mortgages. Already recent housing-market data has shown the massive effect the surge in rates has had on home buyers. “The pandemic boom in home sales is over, and activity is back at pre-pandemic levels,” Mizuho Securities U.S. economist Alex Pelle and chief U.S. economist Steven Ricchiuto wrote in a research note.