U.S Mortgage Rates Hit Five Percent Following Another Spike in Inflation

In the week ending April 14, 2022, mortgage rates rose for a sixth consecutive week.

30-year fixed rates jumped by 28 basis points to 5.00%. 30-year fixed rates rose by 5 basis points in the week prior. It was the first time that mortgage rates stood at 5% since 2010.

Year-on-year, 30-year fixed rates were up by 196 basis points.

30-year fixed rates were up by 6 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

In the first half of the week, inflation was back in the spotlight. With a further disruption to supply chains, the markets expect the upward trend in wholesale and consumer prices to continue.

In March, the annual rate of inflation accelerated from 7.9% to 8.5%, a new four-decade high. The pickup in inflationary pressure drove Treasury yields northwards as the markets bet on a more aggressive Fed rate path for the year.

Wholesale prices were also on the rise. In March, the producer price index increased by 1.4%, following a 0.9% gain in the previous month.

Freddie Mac Rates

The weekly average rates for new mortgages, as of April-14, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates jumped by 28 basis points to 5.00% in the week. This time last year, rates had stood at 3.14%. The average fee remained unchanged at 0.8 points.

• 15-year fixed rates surged by 26 basis points to 4.17% in the week. Rates were up by 182 basis points from 2.35% a year ago. The average fee increased from 0.8 points to 0.9 points.

• 5-year fixed rates increased by 13 basis points to 3.69%. Rates were up by 89 basis points from 2.80% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

• Mortgage rates averaged five percent for the first time in over a decade.
• The combination of rising mortgage rates, elevated home prices, and tight inventory is making the pursuit of homeownership the most expensive in a generation.

Mortgage Bankers’ Association Rates

For the week ending April 8, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances rose from 4.90% to 5.13%. Points increased from 0.53 to 0.63 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA increased from 4.90% to 4.95%. Points rose from 0.68 to 0.75 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 4.51% to 4.68%. Points rose from 0.34 to 0.37 (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, decreased by 1% in the week ending April-08. The Index declined by 6.3% in the previous week.

The Refinance Index fell by 5% and was 62% lower than the same week one year ago. In the week prior, the Index slid by 10%.

The refinance share of mortgage activity decreased from 40.6% to 37.1% of total applications. In the previous week, the share fell from 40.6% to 38.8%.

According to the MBA,

• 30-year fixed mortgage rates rose to 5.13%, the highest since November 2018.
• Refinance activity took a hit, falling to the slowest weekly pace since 2019.
• MBA’s April 2022 forecast now sees mortgage originations down 35.5% from 2021, as a result of a projected 64% slide in refinance originations.
• The jump in mortgage rates will adversely impact the housing market and housing demand for the remainder of the year.

For the week ahead

There are no stats due out of the U.S to provide U.S Treasury yields with direction early in the week. A lack of stats will leave U.S Treasuries in the hands of FOMC member chatter, economic data from China, and news updates from Ukraine.

On Monday, Q1 GDP numbers from China will set the tone.