The increase from a 3.93 percent average last week was the largest one-week jump in 26 years, according to a report Thursday from mortgage buyer Freddie Mac. And it shows the Federal Reserve's hints that it might slow its bond purchases this year are already affecting consumers.
In the short run, a spike in rates could prompt more people to buy homes, giving the housing recovery an added boost. That's because would-be buyers would want to lock in the rates before they rise further.
But if rates continue to climb, eventually some buyers might feel priced out. That could slow homes sales at a crucial time.
Interest rates have jumped after Fed Chairman Ben Bernanke said on June 19 that the Fed could slow its bond purchases later this year if the economy strengthens. Since Bernanke's comments, the yield on the 10-year Treasury note has risen to a two-year high. Mortgage rates tend to track the yield on the Treasury note.
Freddie Mac also said the average on the 15-year mortgage rose to 3.50 percent from 3.04 percent last week. That's the highest since August 2011.
Mortgage rates remain low by historical standards. Still, the impact 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 will pay $881 a month, according to Bankrate.com. Another buyer who gets a 4.46 percent rate this week on a mortgage of the same amount will pay $1,008 a month.
The difference: $127 more a month, or $45,720 over the lifetime of the loan. The figures don't include taxes, insurance or initial down payments.
Anthony Geraci, a Cleveland real estate broker-owner, is already seeing more sales activity in his market because of the increase in rates.
"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 Geraci, whose brokerage has 270 agents.
The rise in rates comes at a critical time in the housing recovery. Low mortgage rates have helped fuel home sales over the past year. In May, completed sales of previously occupied homes surpassed the 5 million mark for the first time in 3 1/2 years.
And the number of people who signed contracts to buy homes leaped last month to the highest level since Dec. 2006, the National Association of Realtors said in a separate report Thursday. That suggests sales will rise even further in the coming months because there is generally a one- to two-month lag between a signed contract and a completed sale.
Greater demand, along with the tight supply of homes for sale, has driven up home prices. It's also fueled more construction, which creates jobs and contributes to economic growth.
Geraci says a slight rate increase won't put off buyers immediately because there just aren't enough available homes for sale.
"So buyers that find a nice home, no matter what the rates are, are going to move on it," Geraci said. "If there's enough supply, people might sit and wait a little bit and see if the rates come down."
Rising rates motivated Alex Backus to act two weeks ago and sign a contract on a $365,000, three-bedroom house in the Seattle suburb of Edmonds, Wash.
Backus, 30, had searched listings for two months before signing the contract. He locked in a 30-year loan at a fixed rate of 4.125 percent.
"Seeing that interest rates were starting to come back up, it seemed like now was the time to really start to get serious about buying a home," said Backus, an aerospace engineer.
Veiga reported from Los Angeles.