Mortgage rates rose from a record low this week, increasing above the 3% threshold, as a resurgence in COVID-19 infections in the U.S. caused lenders to worry about the jobs market.
The average rate for a 30-year fixed mortgage is 3.01%, Freddie Mac said on Thursday, up from 2.98% last week, which marked the first time the rate fell below 3%. The 15-year rate averaged 2.54%, up from last week when it was 2.48%, the lowest in a data series going back almost 30 years, according to the mortgage financier.
Mortgage rates rose as lenders reacted to news of record-setting COVID-19 infections in some of the nation’s biggest states. The resurgence of the pandemic caused jobless claims to rise this week for the first time since late March, the Labor Department said in a report on Thursday.
“The concern is that the pause in economic activity will cause unemployment to remain elevated, which will lead to longer-term labor market distress,” said Sam Khater, Freddie Mac’s chief economist.
If the rate had tracked the 10-year Treasury yield this week, as it normally does, it likely would have set a new record low. Investors are piling into the bond markets because of concerns about the impact on the economy of the worsening pandemic.
But lenders are letting that difference, known as a margin or a spread, widen as they keep a buffer called a “risk premium,” said Keith Gumbinger, vice president at HSH.com, a mortgage data firm.
The higher rate may also reflect that lenders are overwhelmed by applications to refinance mortgages and don’t want to worsen the flood of new borrowers, he said.
“In the last couple of weeks we’ve seen a flare of refinancing activity,” Gumbinger said. “Lenders are thinly staffed, so this could be a little metering of the flow of inbound business.”
In the long-term, rates likely are heading lower, he said.
“I still think rates are going to go lower as we go forward because of the slow economy, and we probably will see risk premiums easing going forward,” Gumbinger.