Mortgage rates hit highest point in 22 months

Mortgage rates this week jumped to their highest level since March 2020 as elevated inflation fueled expectations for a higher interest rate environment.

The rate on the 30-year fixed mortgage — the most common home loan for buyers — increased to 3.45% from 3.22% last week, according to Freddie Mac. That marked the highest level since the last week of March 2020 when the rate hit 3.50%. A year ago, the rate was 2.79%.

The increase comes after the federal government reported that consumer prices rose 7% in December, the biggest jump since 1982. Economists expect the Federal Reserve to make moves to raise interest rates to combat inflation.

“This was driven by the prospect of a faster than expected tightening of monetary policy in response to continued inflation exacerbated by uncertainty in labor and supply chains,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “The rise in mortgage rates so far this year has not yet affected purchase demand, but given the fast pace of home price growth, it will likely dampen demand in the near future.”

Rising rates in the short term are actually heating up the housing market, as buyers scramble to lock in rates while also dealing with sky-high prices and scant inventory of homes for sale, according to George Ratiu,'s manager of economic research. The volume of purchase applications increased 2% last week over the previous one, according to the Mortgage Bankers Association.

“Real estate markets are unseasonably active this January,” Raitu said in an email, noting that at the current rate, buyers of a median-priced home are paying around $219 more a month than a year ago, which adds more than $2,600 to their annual housing costs.

“This amounts to more than half of a household’s food-at-home budget for the year,” he said. “With prices for most consumer goods and services increasing, buyers are feeling the...

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