US Mortgage Rates Hit 6.5% with More to Come on Rising Inflation

In the week ending February 23, mortgage rates rose for the third consecutive week. 30-year fixed mortgage rates increased by 18 basis points to 6.50%.

Following the latest rise, 30-year fixed rates are up 151 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 261 basis points year-over-year.

Economic Data from the Week

It was a quiet first half of the week, with US prelim private sector PMI numbers for February in focus.

The services PMI jumped from 46.8 to 50.5 to fuel bets of a more aggressive Fed interest rate trajectory to bring inflation to target.

In the second half of the week, US Core PCE Price Index, personal income, and spending supported a more aggressive Fed policy outlook. The stats point to higher interest rates for longer and higher mortgage rates and will influence next week’s mortgage rates.

Fed chatter was also hawkish at the end of the week. Fed hawk Loretta Mester spoke on Friday, saying,

“It’s going to take more effort on the part of the Fed to get inflation on that sustainable downward path to 2%.”

Freddie Mac US Mortgage Rates

The weekly average rates for new mortgages, as of February 23, 2023, were quoted by Freddie Mac to be:

• 30-year fixed rates jumped by 18 basis points to 6.50%. This time last year, rates stood at 3.89%.
• 15-year fixed rates surged by 25 basis points to 5.76%. Rates were up by 262 basis points from 3.14% a year ago.

According to Freddie Mac,

• Interest rates are repricing for stronger-than-expected US economic growth, tight labor market conditions, and sticky inflation.
• Rate dispersion widens as mortgage rates rise, meaning homebuyers can make sizeable savings by shopping around.

Mortgage Bankers’ Association Rates

For the week ending February 17, 2023, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 6.39% to 6.62%. Points increased from 0.70 to 0.75 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 6.25% to 6.39%. Points rose from 1.14 to 1.16 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances rose from 6.26% to 6.44%. Points increased from 0.43 to 0.53 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, tumbled by 13.3%. The Index slid by 7% in the previous week.

The Refinance Index declined by 2% and was 72% lower than the same week one year ago. In the previous week, the Refinance Index slid by 13%.

The refinance share of mortgage activity increased from 32.0% to 32.5%. In the previous week, the refinance share declined from 33.9% to 32.0%.

According to the MBA,

• Mortgage rates increased across all loan types, with 30-year fixed rates hitting their highest level since November 2022.
• Rising rates weighed on purchase applications that fell to their lowest level since 1995.
• Over the last two weeks, rates surged, leading to a pullback in applications at a busy time of the year for homebuyers.
• Mortgage rates are more than 2.5% higher than a year ago, which will weigh on refinance activity over the near term.

For the week ahead

It is a busy first half of the week. Core durable goods orders will draw interest on Monday. A pickup in orders would fuel hawkish Fed bets. However, consumer confidence numbers on Tuesday and ISM Manufacturing PMIs on Wednesday will likely have more influence on US Treasury yields.

While the stats will influence, the inflation numbers from Friday will likely push mortgage rates higher for a fourth consecutive week.