US Mortgage Rates Breach 6% on US CPI Report for August

In the week ending September 15, mortgage rates broke through the 6% mark for the first time since 2008. 30-year fixed rates increased by 13 basis points to 6.02%. In the week prior, rates jumped by 23 basis points to 5.89%. Following the 13-basis point rise, rates are up 103 basis points from an August 3 low of 4.99%.

Year-on-year, 30-year fixed rates were up by 316 basis points to reach a new 2022 peak.

Economic Data from the Week

On Tuesday, the US CPI report for August was the key driver behind the uptick in mortgage rates. Better-than-expected CPI numbers drove US Treasury yields and mortgage rates higher.

Market bets of a percentage point rate hike surfaced in response to the report, driving mortgage rates beyond six percent.

Freddie Mac Rates

The weekly average rates for new mortgages, as of September 15, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 13 basis points to 6.02%. This time last year, rates stood at 2.86%. The average fee stood at 0.8 points.

• 15-year fixed rates rose by five basis points to 5.21%. Rates were up by 309 basis points from 2.12% a year ago. The average fee stood at 0.9 points.

• 5-year fixed rates jumped by 29 basis points to 4.93%. Rates were up by 242 basis points from 2.51% a year ago. The average fee stood at 0.2 points.

According to Freddie Mac,

• Better-than-expected US inflation figures pushed mortgage rates to the highest level since 2008.
• While rates will continue to weigh on demand and house prices, inventories remain low.
• Low inventory levels should cushion the housing sector from a sizeable price correction.

Mortgage Bankers’ Association Rates

For the week ending September 9, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 5.94% to 6.01%. Points fell from 0.79 to 0.76 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA rose from 5.61% to 5.71%. Points increased from 1.06 to 1.12 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 5.46% to 5.56%. Points declined from 0.40 to 0.39 (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 1.2%. The Refinance Index fell by 4% and was 83% lower than the same week one year ago.

The refinance share of mortgage activity declined from 30.7% to 30.2% of total applications.

According to the MBA,

• The 30-year fixed mortgage rate hit the six percent mark for the first time since 2008.
• Higher mortgage rates have weighed heavily on refinancing activity, with homebuyers staying on the sidelines.
• A widening spread between the conforming 30-year fixed mortgage rate and the ARM and Jumbo loans reflects the uncertainty about the Fed’s future policy moves.

For the week ahead

It is a quiet week on the economic data front, with US economic indicators limited to housing sector stats. While the numbers will draw interest, they are unlikely to influence US Treasury yields.

However, the Fed monetary policy decision on Wednesday and the FOMC economic forecasts will have a material impact on mortgage rates. A hawkish Fed rate hike would support another upswing in mortgage rates.