US Mortgage Rates Rise to 6.29% in Response to the Fed

In the week ending September 22, mortgage rates continued to surge higher after breaking through the 6% mark for the first time since 2008. 30-year fixed rates increased by 27 basis points to 6.29%. In the week prior, rates rose by 13 basis points to 6.02%.

Following the 27-basis point rise, rates are up 130 basis points from an August 3 low of 4.99%. Year-on-year, 30-year fixed rates were up by 341 basis points to reach a new 2022 peak.

Economic Data from the Week

It was a quiet week on the economic calendar, with housing sector numbers in focus. While the stats had a muted impact on US Treasury yields, the FOMC monetary policy decision and FOMC projections drove yields higher.

A hawkish 75-basis point interest rate hike sent mortgage rates higher for a fifth consecutive week. The rise came despite the FOMC downwardly revising growth projections for this year and 2023.

Freddie Mac Rates

The weekly average rates for new mortgages, as of September 22, 2022, were quoted by Freddie Mac to be:

• 30-year fixed rates increased by 27 basis points to 6.29%. This time last year, rates stood at 2.88%. The average fee rose from 0.8 to 0.9 points.

• 15-year fixed rates jumped by 23 basis points to 5.44%. Rates were up by 329 basis points from 2.15% a year ago. The average fee increased from 0.9 to 1.0 points.

• 5-year fixed rates rose by four basis points to 4.97%. Rates were up by 254 basis points from 2.43% a year ago. The average fee increased from 0.2 to 0.4 points.

According to Freddie Mac,

• Mortgage rates rose higher in response to 10-year Treasury yields surging to their highest level since 2011.
• The housing sector continues to face headwinds because of the rise in mortgage rates.
• House price growth is easing, with home sales falling.
• However, the number of homes for sale remains below normal levels.

Mortgage Bankers’ Association Rates

For the week ending September 16, 2022, the rates were:

• Average interest rates for 30-year fixed with conforming loan balances increased from 6.01% to 6.25%. Points fell from 0.76 to 0.71 (incl. origination fee) for 80% LTV loans.
• Average 30-year fixed mortgage rates backed by FHA rose from 5.71% to 5.85%. Points increased from 1.12 to 1.15 (incl. origination fee) for 80% LTV loans.
• Average 30-year rates for jumbo loan balances increased from 5.56% to 5.79%. Points rose from 0.39 to 0.46 (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, increased by 3.8% in the week ending September 16. The Index decreased by 1.2% in the week prior.

The Refinance Index jumped by 10% from the previous week and was down 83% from the same week one year ago. In the previous week, the Index fell by 4%.

The refinance share of mortgage activity rose from 30.2% to 32.5%. In the week prior, the refinance share declined from 30.7% to 30.2% of total applications.

According to the MBA,

• Treasury yields continued to climb in anticipation of the Fed’s September policy meeting and another hawkish rate hike.
• While mortgage rates rose to their highest level since 2008, applications increased for the first time in six weeks.

For the week ahead

It is a busier week on the economic data front, with consumer confidence, core durable goods, and durable goods orders due on Tuesday. While core durable goods orders will draw interest, consumer confidence will likely impact yields the most.

Fed Chair Powell and FOMC members will also draw plenty of interest. On Wednesday, Fed Chair Powell will speak at the 2022 Community Banking Research Conference.