Mortgage rates are quickly rising and home buyers are trying to snatch up low rates before further increases. Rate lock activity jumped in March as the average 30-year fixed-rate mortgage neared 5%, according to Black Knight’s March Originations Market Monitor.
“Despite seeing the fastest one-month rise in rates in nearly 13 years, we saw purchase lock volumes increase by 31% from February—likely as prospective buyers moved to lock in their loans before rates climbed any higher,” says Scott Happ, Black Knight secondary marketing technologies president.
The higher rates are chipping away at affordability. LendingTree offers the following example: A 30-year fixed-rate mortgage loan worth $300,000 would have cost a buyer about $1,283 a month with the average rate on Dec. 30, 2021, of 3.11%. But at a recent average rate of 4.67%, that monthly cost jumps to $1,551, an increase of $268 a month, $3,216 a year, and $96,480 over the lifeof the loan.
By the end of March, the 30-year fixed-rate mortgage rose 70 basis points to 4.79%, the highest level in more than three years, according to the Optimal Blue Mortgage Market’s index and its daily rate tracker.
As rates rose, the average loan increased by more than 23% to slightly under $361,000 in March compared to February, according to data from CoreLogic.
While rate locks are most commonly for 30 days, buyers can lock rates for 45 days or more. But buyers often must pay for a rate lock and will pay more for a longer hold.
Some buyers also are looking at buying down their interest rate by paying points to get a more attractive rate. Lenders may offer an option to pay a lump sum up front to lower the interest rate over the life of a loan. One discount point, in general, costs 1% of the total mortgage and could lower the interest rate by about 0.25%. Purchasing points could save tens of thousands or even hundreds of thousands of dollars over the life of a loan, lenders say, for buyers nervous about rising rates.