You just made it more difficult to buy a house if you don’t have a fixed mortgage rate. 

According to Mortgage News Daily, Monday’s average rate for the 30-year-old mortgage was 3.64%. This follows a sharp rise last week. The rate stood at 3.5% on Friday and 3.29% last Monday.

Mid-week saw the Federal Reserve announce that it will offload mortgage-backed securities from its balance sheets sooner than anticipated. On news of the potential coronavirus variant Omicron, which could quickly spike, then rapidly moderate and leave economic activity vulnerable, bond yields rose. The yield on the 10-year Treasury is closely followed by mortgage rates.

Matthew Graham, MND’s chief operating officer wrote that bonds sold at the fastest rate in 9 months. This was due to a combination between a Fed hawkish pivot and paradoxical optimism. The selling sentiment was exacerbated by the looming Treasury issuance and corporate bond issuance.

Potential homebuyers are likely to be hit hard by this rate increase. The median price home is $350,000. Buyers who have financed 20% of the purchase will pay $125 per month, which is 11% more than it was three weeks ago. Even greater monthly increases will occur for people who take out low-down payment loans.

The mortgage rate has not been as high since early 2020 when the pandemic began. After a brief spike in rates for 3 weeks, they continued to fall pre-pandemic, reaching more than 12 record lows before the beginning of winter. This was due to a massive increase in housing demand caused by the pandemic. Homebuying soared quickly.

Rates moved by a small margin in 2021 but they remained relatively low. This further fueled demand and boosted home prices. Chronic low supply is what held back buyers.

As buyers reach an affordability barrier, higher interest rates may cause high prices to drop. However, strong investor demand for housing is a major factor in driving prices up. Mortgages are not as popular with investors.

Although demand is growing for homes that are newly constructed, stocks at the major builders like the Big Builders, Inc., remain stable. DR Horton, Lennar Toll BrothersThe falling. Sharp rate movements in any direction tend to cause them to quickly react. Building analysts have been very bullish about the sector due to strong fundamentals. However, they now appear to be questioning their position.

In a Monday note, RBC analysts wrote that they expect builders to remain captive by the Fed and rates. We are more concerned as the year goes on as housing fundamentals will moderate.