U.S. mortgage rates jump to the highest level since April 2020

• Mortgage rates rose this week

• 30-year average crossing over 3.916% early this week, increasing from 3.74% a week ago

U.S. mortgage rates rose last week, raising the 30-year rate to 3.7%, its highest since early April 2020 and 83 basis points higher than the same time one year ago.

Mortgage News Daily reported that mortgage rates were at their highest levels in around a month, with the 30-year fixed average crossing over 3.916% early this week, increasing from 3.74% a week ago.

Mortgage rates loosely follow the yield on the 10-year U.S. Treasury, but they are also affected by the demand for mortgage-backed bonds. The Fed had been buying those bonds during the pandemic to keep rates low, but it is now pulling out of the MBS market faster than expected.

Read more: Fed to wind-down bond purchases, signals three rate hikes in 2022

The current mortgage rates are reacting to surging bond yields, as financial markets react to swifter and more aggressive monetary policy tightening by the Federal Reserve.

Mortgage rates, “would be higher, but lenders are compressing their margins to compete in a rising rate environment. Some will be at 3.625%, but many are already up to 3.75%,” said Matthew Graham, COO of Mortgage News Daily.

The 30-year fixed-rate refinance rose to 4.058% while the refinance rate on a 15-year fixed-rate refinance was up to 3.067%.

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Both new and existing home prices are at record highs, and there is still not enough supply to cool the market.

Buyers of the median-priced existing home (around $350,000) are now looking at monthly payments of about $125 more than they would have been just a few months ago, reported CNBC. That may price some out of the market, especially first-time buyers on the lower end.

Read more: U.S. inflation surges to a whopping 6.8% in November

Inputs from CNBC