Average U.S. 30-year mortgage rate above 4% for first time since 2019

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The return of 4% mortgage rates is upon us.

The average rate on a 30-year fixed-rate mortgage was 4.16% as of the week ending March 17, up 31 basis points from the previous week, Freddie Mac FMCC, +2.14% reported Thursday. One basis point is equal to one hundredth of a percentage point, or 1% of 1%.

It’s the first time that mortgage rates have surpassed 4% since May 2019, and it represents the highest level for mortgage rates since April of that year.

And according to economists, this is likely just the beginning. “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year,” said Sam Khater, chief economist at Freddie Mac, in the report.

The Fed does not directly control mortgage rates, as it manipulates short-term interest rates. Instead, mortgage lenders take their cues from the bond market when setting the rates on loan products, including the yield on the 10-year Treasury TMUBMUSD10Y, 2.146%. Bond yields moved higher ahead of the Fed’s announcement Wednesday that it would hike interest rates for the first time since 2018.

As of Thursday, the average rate on the 15-year fixed-rate mortgage was 3.39%, up 30 basis points from the previous week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.19%, up from 2.97% the week prior.

But the upcoming weeks may be a volatile time for mortgage rates. Already, Treasury yields have fallen as investors began to reassess the Fed’s projections for future rate increases. Still, with inflation remaining high, an upward climb overall over the course of the year is what is expected.

How precisely the increase in rates will affect the housing market remains to be seen. “Rising mortgage rates are no doubt a headwind for housing demand,” Jeffries chief economist Aneta Markowska and money market economist Thomas Simons wrote in a research note.

Buyers with smaller budgets may find their options more limited as rates rise. At the same time, the low supply of homes for sale will all but guarantee that competition in the housing market will remain elevated, at least through the popular spring home-buying season. So if demand does end up subsiding eventually in the face of higher rates, home prices may not suffer much as long as inventory is constrained.

See also: Want to buy a home? Here’s the No. 1 strategy for winning a bidding war

Don’t miss: Looking to sell in 2022? The best time to list your home is just around the corner

This article was originally published by Marketwatch.com. Read the original article here.

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