Mortgage rates have shot back above 3% — borrowers may not want to delay

Mortgage rates that plunged to record lows in 2020 and early this year are spiking now — and are above 3% for the first time since November, according to one survey.

They're being pushed up by optimism over vaccinations and the COVID relief bill working its way through Congress, and by fears that an improving economy will spark inflation.

Zillow economist Matthew Speakman warns that "the days of all-time low rates may be a thing of the past." But he's also giving borrowers a reality check, reminding them that "mortgage rates remain very low by historic standards."

That means you should move now to get deal on loan for a new home, or on a refinance that will shrink your monthly housing costs — before rates go even higher.

30-year mortgages

The average for a 30-year fixed-rate mortgage soared on Friday to an average 3.04%, according to Mortgage News Daily's survey of lenders. The website says it's "time to wake up to the new mortgage rate reality."

Rates also have jumped in the closely watched weekly survey from mortgage giant Freddie Mac, though its numbers tend to lag. After three weeks of no movement, the average for a 30-year fixed-rate home loan climbed to 2.81% last week, the highest since mid-November.

Rates were up from an average 2.73%, where they'd stood since mid-January. Despite the increase, mortgages remained much cheaper than they were a year ago, when the average for a 30-year loan was 3.49%, Freddie Mac reported on Thursday.

15-year mortgages

For other popular types of mortgages, rates were mixed last week, according to Freddie Mac.

The average for a 15-year fixed-rate home loan edged up to 2.21%, from 2.19% the previous week. Those shorter-term mortgages, which are a popular choice for refinancing, were averaging 2.99% at this time last year.

5/1 adjustable-rate mortgages

Starter rates on 5/1 adjustable-rate mortgages, or ARMs, slipped to an average 2.77%, down from 2.79%. One year ago, those ARMs were going for an average 3.25%.

The loans have rates that fixed for the first five years and then can "adjust" — up or down — each (one) year.

Mortgage rates follow other interest rates up the hill

Mortgage rates are tagging behind the interest on Treasury bonds, which spiked early last week to the highest level since March.

The pop in Treasury yields "came from positive retail sales numbers and the rebound in homebuilder sentiment, which buoyed bond investors' outlook and drove up interest rates for home mortgages," says George Ratiu, senior economist with Realtor.com.

But investors also fear that as the economy recovers, inflation will bubble up — "something that would reduce the value of bonds’ fixed-payments, and possibly lead the Federal Reserve to raise interest rates and place more upward pressure on yields and mortgage rates," says Zillow's Speakman.

Fed Chairman Jerome Powell has tried to reassure markets that the Fed isn't anywhere close to raising rates. In a recent speech, he also indicated that the central bank will be willing to accept a little inflation if it's good for jobs.

Though mortgage rates are rising now, Freddie Mac chief economist Sam Khater says borrowers will continue to find attractive rates on home loans.

"While there are multiple temporary factors driving up rates, the underlying economic fundamentals point to rates remaining in the low 3% range for the year," Khater says.

Don't 'time the market' and hold out lower rates

Whatever you do, don't sit back and wait in hopes mortgage rates will tumble back toward their record lows. That's not likely to happen, given what the bond market is doing. If you see a mortgage rate that would work for you and provide a low monthly payment, try to lock it with the lender so it won't slip out of your grasp.

Though homebuyers are facing multiple challenges right now — including high home prices and shortages of houses for sale — homeowners who haven't refinanced yet have no good reasons for not going mortgage shopping.

Research published earlier this month by the mortgage technology and data provider Black Knight showed that 16.7 million homeowners are good candidates to refi and could save an average $303 a month.

To find the best refinance loan, shop around. That's vital, because mortgage rates can vary from one lender to the next. Seek out and compare offers from at least five lenders, because multiple studies have found that getting at least five loan offers is the key to finding a rate that will save you thousands over time.

Then, don't let your comparison shopping skills get rusty — they'll come in handy again when you buy or renew your homeowners insurance. Review rates from multiple insurers to find a lower price on the coverage you need.