Mortgage rates soar to 3-year high following first Fed interest rate hike

Yahoo Finance's Gabriella Cruz-Martinez discusses the 30-year mortgage rate hitting 4.42%, the highest level in three years, and what it means for homebuyers.

Video Transcript

RACHELLE AKUFFO: Welcome back to Yahoo Finance Live, everyone. Well, if buying a new home was on your bucket list this year, the mortgage rates might make that a little bit of an uphill battle. For more on that, let's bring in our personal finance reporter, Gabriella Cruz-Martinez. Gabriella, what can you tell us?

GABRIELLA CRUZ-MARTINEZ: Thank you for having me, Rachelle. Yeah, so mortgage rates are continuing to march up. And we've seen the 30-year fixed rate mortgage has just hit its highest point in three years at 4.42%. And this is pretty remarkable because this means that mortgage rates have jumped more than a 1/2 point in the last two weeks alone. By comparison, this time last year, rates were around 3.17%.

What's surprising is that entering this year, economists predicted that mortgage rates would hit the 4% mark toward the year end. But already last week, Freddie Mac mortgage rates surpassed that 4% threshold. And unfortunately, for a lot of first-time homeowners-- I mean, first-time homebuyers and homeowners, this upward trend is likely to continue.

RACHELLE AKUFFO: I mean, I'm sure that's tough news for people. As you mentioned, mortgage rates climbing almost every week since the start of the year. How does this rise in mortgage rates affect homeowners and first-time home buyers?

GABRIELLA CRUZ-MARTINEZ: Yeah, so that's a great point. A lot of homeowners and potential homebuyers will face immediate headwinds as further rate increases. So I'll start off by mentioning how this affects homeowners. So many homeowners have already taken advantage of the historically low mortgage rates that we've seen in these past two years. But for the handful that may have been on the fence of refinancing, rising mortgage rates may mean that they will have to push that pause button on those plans for the moment.

Just to add a little bit of perspective, according to mortgage technology and data provider Black Knight, at the start of the year, there were about 11 million refinanced candidates. And with rates now at 4.42%, that number has plummeted to just 2 million, down from 2.6 million just last week. Meanwhile, on the home selling front, we're seeing home sellers continue to have the upper hand, and we're seeing a rush of buyers just trying to lock in rates as soon as possible, ahead of further rate increases. And a lot of bidding wars have been breaking out.

So what this means is that climbing rates will likely squeeze a lot of first-time homeowner-- first-time homebuyers out of the market. According to realtor.com, the share of first-time buyers was up 27% in February, but down 29% from a year ago. So this means that this pool of buyers is already facing a fiercely competitive market entering the spring. And on top of that, they're facing increase in prices and record low inventory levels. Fortunately, there are some home buyers out there that may benefit from the surge in home prices.

EMILY MCCORMICK: All right, we'll leave it there for now. Yahoo Finance's own personal finance reporter, Gabriella Cruz-Martinez, thank you so much for breaking that down for us.