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The are notoriously complicated, but here are four factors: The economy is back: The pandemic sent the U.S. economy into a deep recession, and unemployment soared. That brief crash is in the rearview mirror. Employers added a robust 431,000 jobs in March, the U.S. Labor Department reports, and the unemployment rate fell to just 3.6 percent, a level that fits any definition of full employment. Inflation is running hot: The consumer price index jumped 7.9 percent in February, the highest annual rate of inflation since the bad old days of the early 1980s, according to the Labor Department. That’s forcing the Federal Reserve to act. The Federal Reserve is dropping the hammer: The central bank raised rates last week, and the are imminent. Chairman Jerome Powell and company could boost rates as many as seven times this year. The Fed also is slowing the pace of its purchases of mortgage-backed securities, a move that creates upward pressure on rates. The 10-year Treasury yield has risen sharply: This number is closely tied to 30-year mortgage rates, and the has topped 2.3 percent in recent days. Yields on federal debt reflect the overall economy. When the economy crashed in 2020, 10-year rates plunged below 1 percent. Now, they’re back. Next steps for borrowers
Here are some tips for dealing with the new climate of rising interest rates: Shop around for a mortgage. can help you find a better-than-average rate. With the refinance boom slowing, lenders are eager for your business. “Conducting an online search can save thousands of dollars by finding lenders offering a lower rate and more competitive fees,” says Greg McBride, CFA, Bankrate chief financial analyst. Stay away from ARMs. “Don’t fall into the trap of using an adjustable-rate mortgage as a crutch of affordability,” McBride says. “There is little in the way of up-front savings, an average of just one-half percentage point for the first five years, but the risk of higher rates in future years looms large. New adjustable mortgage products are structured to change every six months rather than every 12 months, which had previously been the norm.” Keep a in mind. While is on the wane, it can still make sense in some cases. Home prices have soared, and mortgage rates remain low enough that tapping home equity is the best way to finance home improvements. SHARE: Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Related Articles