21-Mar-22 – If you are buying or refinancing a home and received a mortgage rate quote prior to March 14, you are looking at a relic from a bygone era.

The average benchmark 30-year fixed-rate home loan has catapulted from the mid-3 percent range into the stratosphere with some Chicago lenders charging anywhere from 4.375 to 4.625 percent as of March 17.

Freddie Mac’s Primary Mortgage Market Survey reported on March 17 that the benchmark 30-year fixed home loan national average hit 4.16 percent, up from 3.85 percent a week earlier. A year ago, the popular 30-year fixed mortgage averaged 3.09 percent.

“The rate difference is night and day since November,” noted Jeremy Rose, Vice President of Mortgage Lending at Guaranteed Rate in Chicago. “The cost of money is on the rise. It’s shock theater.”

“The 30-year fixed-rate mortgage exceeded 4 percent for the first time since May of 2019,” said Sam Khater (left), Freddie Mac’s chief economist. “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise in 2022.”

While home purchase demand has moderated, Khater said “it remains competitive due to low existing inventory, suggesting high house price pressures will continue during the spring home buying season.”

On March 17, Freddie Mac reported that 15-year fixed mortgages averaged 3.39 percent, up from 3.09 percent a week earlier. A year ago, 15-year fixed loans averaged 2.40 percent.

As the mortgage rate roller coaster speeds uphill toward 5 percent after the Federal Reserve Board’s 0.25 percent rate hike on March 16, the dual vice grips of rampant 8 percent inflation and worries about the Russia-Ukraine War are putting a squeeze on consumer wallets.

As a result, the record-low home loan deals in the upper-2 percent range that kept the housing market pumping over the past two years are now a faded dream.

The Fed short-term interest rate hike is the first increase since 2018. Economists say projections released by the policy-setting Federal Open Markets Committee signal the likelihood of the Fed raising rates seven more times this year, which would push rates 1.75 percent higher at the end of the year.

On March 17, the 10-year Treasury rate – the gauge economists use to forecast 30-year-fixed mortgage interest charges – rose to 2.19 percent from 2.15 percent.

This means that benchmark 5-percent-plus mortgage rates likely are on the near horizon, especially for borrowers who have a FICO score under 740. If you have a mediocre 650-point credit score, expect to pay a sky-high 5.25 to 5.5 percent today for a 30-year fixed mortgage, lenders said.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a 20 percent down payment and have excellent credit.

While mortgage rates floated near or below the 3 percent bargain range for most of 2021, thousands of Chicago-area homeowners refinanced their loans. Those who sat on the dock not only missed the boat, but the boat now has sunk into deep Titanic-like waters.

The Fed faces an economic balancing act – the worst since the early 1990s. If the Fed shifts too quickly, the central bank could roil markets and tip the economy into a deep recession, experts say.

The big worry is the Russian invasion of Ukraine sending the cost of fuel, food, and metals skyrocketing even higher. This raises economist fears of a 1970-style stagflation that would create threats to prices, growth, and financial market stability.

Earlier, economists forecasted that the federal funds target rate will likely undergo three 25-basis-point interest hikes in 2022, and three more similar increases in 2023.

Now it looks as if the 5 percent level could be broken in early May at the next meeting of the Fed’s Open Market Committee. If the Fed hikes its rates six or seven more times in 2022, mortgage rates could easily rise to 5.5 or 6 percent by the end of the year.

Thirty-year fixed-mortgage interest rates ended 2020 at a rock-bottom 2.65 percent, the lowest level in the Freddie Mac survey history, which began in 1971. Home loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.

However, Chicago-area borrowers who move quickly still have a faint chance to lock in the following bargain rates as of March 17, reports RateSeeker.com.

• First Savings Bank of Hegewisch was quoting 3.49 percent on 30-year loans and 2.85 percent on 15-year mortgages with 20 percent down payment and a $615 loan fee.

• Liberty Bank in Chicago was quoting 3.564 percent on a 30-year loan and 2.75 percent on a 15-year mortgage with 20 percent down and a loan fee of $646.

• Gateway Capital Mortgage in Chicago was quoting 3.8 percent on 30-year loans and 2.875 percent on 15-year mortgages with a 3 percent down payment and a $595 loan fee.