Estimated read time: 3-4 minutes
SALT LAKE CITY — Homebuyers are grappling with mortgage rates that have once again risen above seven percent.
Those rates had fallen noticeably, as KSL-TV reported at the end of September. But since then, they've shot back up. The national average as of Friday was 7.09%, according to Mortgage News Daily.
In just a few weeks, that's an increase of nearly $300 a month for a typical mortgage payment, according to an analysis by Momentum Loans in Sandy.
Pam Greenspon recently bought a house in Lehi in a new neighborhood that's still under construction. While she benefitted from quite a bit of equity when she sold her previous home, Greenspon said the rate for her new home was higher than she would have liked.
"I was hoping by the time I closed on the loan that rates would come down," she said. "They came down a skosh bit, but they didn't come nearly as much as I was hoping."
The reason behind the rise
Christian vom Lehn, an economics professor at Brigham Young University, said the reason for the roller coaster rates comes down to economic indicators.
"It really reflects the fact that the U.S. economy is doing pretty well," said vom Lehn, noting strong performance in gross domestic product, unemployment, and the labor market.
Because of that, he said, there's doubt about how much the Federal Reserve will cut rates in the future. Beyond that, vom Lehn said there's turbulence in the markets because of the election.
"We have a lot of extra volatility and uncertainty that people will feel, and that sometimes shows up in things like these mortgage rates," vom Lehn said. "I think we'll have more clarity and stability once we can move past the volatility of the election and have more certainty about what's going to be ahead for the economy for the next six months or a year."
The latest jobs report Friday was "weaker than what economists were forecasting," vom Lehn added. Could that lead to mortgage rates dipping?
Not necessarily, vom Lehn said, because the lower jobs numbers were largely due to strikes and hurricanes — factors that are not a permanent part of the U.S. economy.
However, the Mortgage Bankers Association said Friday it expects steady rate cuts in the future, citing the weaker jobs report.
"(T)oday's news is likely to bring mortgage rates somewhat lower as it adds more evidence that the economy is on a path to slower growth," the organization said in a statement.
Going forward, vom Lehn still believes mortgage rates will decline some.
"But I think we should perhaps start to normalize the thinking that the really low interest rates we've seen for the last 20 years may not be the norm," he said. "That may have been the exception."
Waiting out the market
KSL-TV has reported extensively on Utah's housing market and, recently, the volatility in mortgage rates.
In August, Leland Schuyler said he was waiting for the right time to refinance his home in Payson, which he bought with a 7.25% rate.
In September, Emma Nelson said she and her husband planned to refinance to save some money on their monthly townhome payment, which carries a 7.625% rate.
But as of Friday, both told KSL-TV they had not yet pulled the trigger – because of the market.
Schuyler said with current rates, it doesn't make sense financially for him to refinance because of the closing costs involved.
As for Nelson, she's still waiting for the right rate.
"They haven't been what we want yet," she said.
Back in Lehi, Greenspon said she plans to refinance her mortgage if rates drop over the next two years.
For now, though, she's enjoying her new home.
"Although, I don't like living in a construction zone," she said, laughing. "There's construction going on all day long."