US Mortgage Rates Reach the Doorstep of 7% on Fed Hike Expectations

In the week ending October 13, mortgage rates increased for the seventh time in eight weeks. 30-year fixed mortgage rates jumped by 26 basis points to 6.92%. In the week prior, 30-year fixed rates had fallen by four basis points to 6.66%.

Following the latest upswing, rates are up 193 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 398 basis points year-over-year to strike a new 2022 peak.

Economic Data from the Week

It was a relatively busy week on the economic calendar, with wholesale and consumer price inflation in focus alongside the FOMC meeting minutes.

US economic indicators continued to support more hawkish Fed moves over the remainder of the year. While wholesale and consumer price inflation softened in September, both reports reflected price resilience, supporting 75-basis point Fed rate hikes in November and December.

However, the FOMC meeting minutes provided the markets with hope that the Fed would take its foot off the gas should economic indicators begin to flash red.

Freddie Mac Rates

The weekly average rates for new mortgages, as of October 13, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates jumped by 26 basis points to 6.92%. This time last year, rates stood at 3.05%. The average fee held steady at 0.8 points.

• 15-year fixed rates rose by 19 basis points to 6.09%. Rates were up by 379 basis points from 2.30% a year ago. The average fee increased from 1.0 to 1.1 points.

• 5-year fixed rates surged by 45 basis points to 5.81%. Rates were up by 326 basis points from 2.55% a year ago. The average fee fell from 0.3 points to 0.2 points.

According to Freddie Mac,

• 30-year fixed rates hit their highest levels since April 2002.
• Strong job and wage growth continue to keep consumer balance sheets in a strong position.
• By contrast, inflation, recession fears, and house affordability continue to weigh heavily on housing demand.

Mortgage Bankers’ Association Rates

For the week ending October 7, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 6.75% to 6.81%. Points rose from 0.95 to 0.97 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA rose from 6.60% to 6.61%. Points increased from 1.51 to 1.71 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 6.14% to 6.25%. Points fell from 0.79 to 0.61 (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, fell by 2.0%. The Index tumbled by 14.0%.in the week prior.

The Refinance Index also declined by 2.0% and was 86% lower than the same week one year ago. In the previous week, the Index tumbled by 18%.

The refinance share of mortgage activity remained unchanged at 29.0%. In the previous week, the share refinance declined from 30.2% to 29.0%.

According to the MBA,

• Mortgage rates continued to climb during the final quarter of 2022, with the 30-year conforming rate hitting the highest level since 2006.
• Application volumes for refinancing and home purchases declined and continue to fall further behind last year’s record levels.
• Job and wage growth continued in September, positive for the housing market while removing the chance of the Fed shifting its policy goals.

For the week ahead

It is a quiet week ahead. On Monday, NY Empire State Manufacturing numbers will draw interest before industrial production figures on Tuesday. However, market reaction to last week’s retail sales and consumer sentiment figures will set the tone.

From elsewhere, Q3 GDP, industrial production, fixed asset investment, and retail sales from China will also influence.

However, Fed chatter and market sentiment toward November and December’s monetary policy decisions will likely continue to support mortgage rates at current levels.