WASHINGTON — U.S. mortgage rates have suddenly jumped from near-record lows and are adding thousands of dollars to the cost of buying a home.
The average rate on the 30-year fixed loan soared this week to 4.46 percent, according to a report Thursday from mortgage buyer Freddie Mac. That's the highest average in two years and a full point more than a month ago.
The surge in mortgage rates follows the Federal Reserve's signal that it could slow its bond purchases later this year. A pullback by the Fed would likely send long-term interest rates even higher.
In the short run, the spike in mortgage rates might be causing more people to consider buying a home soon. Rates are still low by historical standards, and would-be buyers would want to lock them in before they rise further.
But eventually, more expensive home loans could price some people out and slow the housing market's momentum, which has helped drive the U.S. economy over the past year.
"People are getting off the fence a little bit more or choosing to buy now instead of choosing to buy three months from now," said Anthony Geraci, a Cleveland real estate broker-owner who says he's seeing more sales activity lately in his market.
Mortgage rates are rising because they tend to track the yield on the 10-year Treasury note, a benchmark for most long-term interest rates. The 10-year yield began rising from near-record lows in May after speculation grew that the Fed might be closer to reducing its bond purchases.
In early May, the average rate on a 30-year mortgage was 3.35 percent, just above the record low of 3.31 percent.
But rates began to surge — and stocks plunged — after Fed Chairman Ben Bernanke made more explicit comments last week about the Fed's plans. He said the Fed would likely scale back its bond buying later this year and end it next year if the economy continued to strengthen.
The rate on 30-year loan soared from 3.93 percent last week to 4.46 percent this week — the biggest one-week jump in 26 years.
The effect on buyers' wallets in just the past two months is striking.
A buyer who locked in a 3.35 percent rate in early May on a $200,000 mortgage would pay $881 a month, according to Bankrate.com. The same mortgage at a 4.46 percent rate would run $1,008 a month.
The difference: $127 more a month, or $45,720 over the lifetime of the loan. Those figures don't include taxes, insurance or initial down payments.
Jed Kolko, chief economist at Trulia, a real estate data analysis firm, thinks many would-be buyers will start to take note.
"Some buyers will reconsider jumping into the market; others will speed up their (home) purchases before rates go higher," Kolko said.
The rate hike comes at a critical time. Low mortgage rates have helped fuel a housing recovery that has kept the economy growing modestly despite higher taxes and steep federal spending cuts.
In May, completed sales of previously occupied homes surpassed the 5 million mark for the first time in 3½ years. And those sales could rise further in June because the number of people who signed contracts to buy homes rose last month to the highest level since December 2006. There's generally a one- to two-month lag between a signed contract and a completed sale.
Greater demand, along with a tight supply of homes for sale, has driven up home prices. It's also led to more home construction, which has created more jobs and contributed to economic growth.