With mortgage rates surging after the election win of Donald Trump, homebuyers may feel compelled to snap up loans before rates rocket even higher. But housing experts say consumers shouldn't get carried away by the post-election wave.
The advance of the past week or so, stoked by a surprise victory that turned economic expectations on their head, could soon settle.
"Consumers considering buying or refinancing now should stay patient, as we'll likely see rates stabilize once markets find a new equilibrium," says Erin Lantz, vice president of mortgages at Zillow.
In the week ended Thursday, the average rate on the 30-year fixed-rate loan jumped to 3.94 percent from 3.57 percent the previous week, mortgage company Freddie Mac reported. That put the benchmark rate close to its year-ago level of 3.97 percent.
The average for a 15-year mortgage, a popular choice for people who are refinancing, climbed to 3.14 percent from 2.88 percent.
The rate rise was powered by a sustained decline in U.S. government bond prices in the days after Trump's victory became known early last Wednesday. Bond investors looked toward tax cuts and beefed-up spending to upgrade roads, bridges and airports under a Trump administration, which could fuel inflation. That would depress prices of long-term Treasury bonds because inflation would erode their value over time. The selling wave dubbed the "Trump Dump" lifted bond yields, which move opposite to prices and influence long-term mortgage rates.
The yield on the 10-year Treasury bond zoomed to 2.06 percent last Wednesday from 1.87 percent on Election Day Tuesday. By this Thursday morning, it was at 2.25 percent Thursday.
Adding to the expectations of higher interest rates, Federal Reserve Chair Janet Yellen sketched a picture Thursday of an improving U.S. economy and said the case for an increase in rates has strengthened. The Fed is widely expected to raise rates when it meets in mid-December.
Spilling over into the mortgage market, prospective buyers have appeared to be streaming in.
"We are seeing borrower demand up," said Sam Mischner, senior vice president of sales at LendingTree.
Still, mortgage rates remain near historically low levels. The all-time low for the 30-year rate was 3.31 percent in November 2012.
"Rates are so low," said Patrick Newport, U.S. economist at HIS Global Insight. If the new expectations for the economy and interest rates "make a dent in the housing market, it shouldn't be much."
The low rates have helped boost home sales and prices this year. But there are economic unknowns as the new administration's economic policy starts to take shape. And constraints on home purchases like tight credit standards and affordability remain, bolstered by market expectations of further rate increases.
Steadily rising rates would ultimately limit the number of possible buyers and how much they can afford to pay. And existing homeowners who might otherwise be looking for an upgrade could choose to stay put rather than face higher interest costs.
The median sales price of existing homes has climbed 5.6 percent from a year ago to $234,200, according to the National Association of Realtors.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.
The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year loan also held steady at 0.5 point.
Rates on adjustable five-year mortgages averaged 3.07 percent, up sharply from 2.88 percent last week. The fee remained at 0.4 point.