Mortgage rates inch further up with bond sell-offs

Mortgage rates inched further up over 5% in the past week, with both 30- and 15-year rates up by more than 10 basis points.

The 30-year fixed-rate average climbed to 5.11% for the weekly period ending April 21, up from 5% seven days earlier, according to Freddie Mac’s Primary Mortgage Market Survey. The 30-year rate has increased for seven straight weeks since early March, when it averaged 3.76%. In the same weekly period last April, the rate stood at 2.97%.

The Fed sits in the driver’s seat when it comes to determining what mortgage rates are doing currently, said Robert Heck, vice president of mortgage at online marketplace Morty. Bond sell-offs have pushed Treasury yields — and mortgage rates tied to them — up recently, particularly after the Fed seemed to signal a quicker-than-anticipated reduction of its balance sheet this year.

“We’re seeing the widening of the credit market due to the possibility of a greater surplus of bonds being sold into the market on top of ongoing volatility. The widening of the credit market and the ongoing volatility replaced inflation as the primary driver of rates moving higher in recent weeks,” Heck said in an emailed statement to National Mortgage News.

“Aggressive balance sheet reduction could mean that we see the Fed actively selling MBS as well, which could lead to a continued increase in mortgage rates even if Treasury yield stabilizes,” Heck also noted.

But the Fed’s actions aren’t the only things lenders need to be watching, according to Paul Thomas, vice president of capital markets at Zillow. “There may be additional concerns of continued supply chain issues from the war in Ukraine and lockdowns in China,” he said in a research blog post, adding that mortgage rates likely will remain volatile given current uncertainty.

“Any comments from members of the Federal Reserve or new developments in Ukraine may have an impact on rates,” he said.

While what has occurred so far this year was not entirely unexpected, the speed at which events are coming seems to be catching many by surprise. “The bottom line is that there’s a lot of uncertainty in the market and a lot left to play out,” Heck said.

“We’re a third of the way through 2022, and we’ve already seen quite a bit of what was predicted for the year play out.”

Rate volatility has also carried over and left a mark on purchase-market patterns, said Sam Khater, chief economist at Freddie Mac. “While springtime is typically the busiest home-buying season, the upswing in rates has caused some volatility in demand,” he said in a press release.

“It continues to be a seller’s market, but buyers who remain interested in purchasing a home may find that competition has moderately softened.”

Other rate terms have also seen large movements in the past two months, and the trend continued over the last week. After rising above 4% last week, the 15-year mortgage jumped to 4.38%, a 21 basis-point increase from 4.17% seven days earlier. In the same time period last year, the 15-year average stood at 2.29%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage also climbed to 3.75%, up from 3.69% the prior week. One year ago, the 5-year ARM came in at 2.83%.