US Mortgage Rates Return to 7% Following the October CPI Report

In the week ending November 10, mortgage rates rose for the tenth time in twelve weeks. 30-year fixed mortgage rates increased by 13 basis points to 7.08%. In the week prior, 30-year fixed rates fell by 13 basis points to 6.95%.

Following the latest increase, rates are up 209 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 410 basis points year-over-year.

Economic Data from the Week

It was a particularly quiet first half of the week on the economic calendar, with no economic indicators influencing US Treasuries and yields.

The lack of stats left the markets to consider Fed pivot bets ahead of Thursday’s heavily anticipated US CPI report.

Ahead of the CPI report, bets of a 75-basis point rate hike were evenly split, allowing the upswing in mortgage rates. Hawkish Fed Chair Powell comments from the week prior resonated.

However, while rates were up in the week, the US CPI report for October will likely sink mortgage rates this week. The US annual inflation rate softened from 8.2% to 7.7% in October. The markets responded strongly to the numbers, with the probability of a December 75-basis point interest rate hike falling from 48% to 17.0%.

Freddie Mac Rates

The weekly average rates for new mortgages, as of November 10, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 13 basis points to 7.08%. This time last year, rates stood at 2.98%. The average fee increased from 0.8 points to 0.9 points.

• 15-year fixed rates rose by nine basis points to 6.38%. Rates were up by 411 basis points from 2.27% a year ago. The average fee decreased from 1.2 points to 1.0 points.

• 5-year fixed rates increased by 11 basis points to 6.06%. Rates were up by 353 basis points from 2.53% a year ago. The average fee remained unchanged at 0.2 points.

According to Freddie Mac,

• The housing market is the most interest-sensitive segment of the US economy.
• Homebuyers continue to face the impact of rates as home sales slide at the year-end.
• Freddie Mac does not see housing market conditions improving before the end of the year.

Mortgage Bankers’ Association Rates

For the week ending November 4, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 7.06% to 7.14%. Points rose from 0.73 to 0.77 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA rose from 6.70% to 6.86%. Points increased from 1.18 to 1.37 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances decreased from 6.55% to 6.50%. Points rose from 0.70 to 0.78 (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 0.1% in the week ending November 4. The Index increased by 1% in the week prior.

The Refinance Index fell by 4% and was 87% lower than the same week one year ago. In the previous week, the Index increased by 0.2%.

The refinance share of mortgage activity declined from 28.6% to 28.1%. The refinance share increased from 28.2% to 28.6% in the previous week.

According to the MBA,

• Mortgage rates increased in response to the Fed rate hike to tackle inflation.
• The 30-year fixed rate remained above seven percent for the third consecutive week.
• Purchase applications rose for the first time in seven weeks but remained close to 2015 lows.
• Higher rates and economic uncertainty left prospective homebuyers on the sidelines.

For the week ahead

It is a quiet start to the week on the economic data front. On Tuesday, wholesale inflation figures will draw interest ahead of retail sales on Wednesday.

However, following last week’s US CPI report and bets of a December pivot, the numbers are unlikely to offset the effects of the CPI report on yields and mortgage rates.

In contrast, FOMC member chatter could shift sentiment. While the markets have bet on a Fed pivot, inflation remains elevated. With an unemployment rate of 3.7% and better-than-expected economic growth in Q3, the hawks may talk up the need for another 75-basis point hike before taking the foot off the gas.

FOMC members Waller, Brainard, Cook, Barr, and Williams speak this week.