Associated Press

WASHINGTON – Average long-term U.S. mortgage rates continued to increase last week. The rate on the benchmark 30-year loan breached 3.5%.

Home loan rates have been running in recent weeks at levels not seen since early 2020, when the coronavirus pandemic was breaking in the U.S. They remain at historically low levels, however.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year loan rose to 3.56% from 3.45% the previous week. By contrast, it stood at 2.77% a year ago.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, jumped to 2.79% from 2.62% the week prior.

Mortgage rates have been expected to increase this year after the Federal Reserve announced last month it would begin dialing back its monthly bond purchases – which are intended to lower long-term rates – to slow accelerating inflation. But even with the expected three or four rate increases in 2022, the Fed’s key rate would still be historically low at about 1%.

Freddie Mac economists expect the higher mortgage rates to bring a modest decline in purchasing demand ahead of the spring homebuying season. They note that the supply of homes available for sale remains tight and prices are still high.

Available housing has been in short supply since long before the pandemic, and prices have risen close to 20% over the past year. Higher mortgage rates could make it even harder for homebuyers to secure a new home.

New data released Thursday showed that sales of previously occupied homes fell in December for the first time in four months as many would-be buyers were frustrated by a lack of available homes – which fell to the lowest level in over two decades.