Although rates began the year at about 4 percent, the numbers surged quickly and will end the day Tuesday closing in at 5 percent, with average rates as high as 4.875 for a standard 30-year fixed loan for borrowers at the high end of the credit rating spectrum. Those borrowers with average credit will look to face rates of at least 5 percent.
Borrowers were encouraged when rates for the year leveled off in the March and early April, but the optimism was short-lived as the numbers began to inch up again. The latest surge is being attributed to a sharp sell-off in the bond market as well as good news in the retail sector on the heels of the news that the recently instituted tariffs will not affect sales as much as once anticipated.
The timing of the rate increase is not good news for consumers looking to purchase homes during the busy spring real estate season. With supply at record lows, home prices have been inflated and many buyers are finding it challenging to find affordable houses. The sharp rate increase will only exacerbate the affordability issue. Many financial experts are hopeful that home prices will begin to stabilize in response to the rising mortgage rates, as sellers are forced to tailor their prices to fit the market demand and what buyers can reasonably afford.