WASHINGTON: Mortgage rates are finally ticking up in the United States, one year after the Federal Reserve cut its lending rate to boost the economy as the Covid-19 pandemic arrived, but that's not expected to cool the hot housing market.
While the wider US economy has struggled after states restricted business to stop Covid-19, real estate was one of the few bright spots in 2020, boosted both by low mortgage rates and the shift towards remote work caused by the pandemic."We've seen mortgage rates move higher in the past month or so," Joel Kan of the Mortgage Bankers Association told AFP.
The housing market is a key part of the world's largest economy, and mortgage rates are closely watched to gauge the ease with which Americans can buy property, reports AFP.
They are tied into the wider US Treasury bond market, where yields have been rising in recent weeks as traders fear that the economy's improving health could bring inflation with it. Rates on 30-year mortgages are now ticking up and expected to hit 3.5 percent by the end of the year, after dropping in July below three percent, a low not reached before.
"In that sense, it is bad news for buyers, because now they are facing higher interest rates, higher monthly payments," said Lawrence Yun, chief economist at the National Association of Realtors.
Mortgage rates have hovered around four percent for the past decade, but US homebuyers have seen much higher borrowing costs in the past.
Rates were around eight percent in the early 2000s, and hit their record high of more than 18 percent in the early 1980s, according to government-sponsored lender Freddie Mac. Despite the recent uptick in rates, Yun says they remain "incredibly low," and predicts better economic growth that puts more money into Americans' pockets will help them overcome the increased borrowing costs and push real estate sales up 15 percent this year.