Mortgage rates inch higher amid inflation control measures

Mortgage rates increased over the past seven days, as markets processed last week’s Federal Reserve announcement, which drove them to their highest level since 2008, Freddie Mac reported.

The 30-year fixed-rate mortgage average hit 5.81% for the seven-day period ending June 23, a 3-point basis jump from 5.78% a week ago, according to Freddie Mac’s Primary Mortgage Market Survey. In the same weekly period last year, the 30-year average stood at 3.02%, while at the end of 2021, it came in at 3.11%. 

The anticipation of a 75-point hike in the federal-funds rate led to last week’s surge, and the Fed’s move still held sway days afterward, contributing to the continued uptick. 

“Comments from the Fed also indicated that they are committed to returning inflation to a long-run target of 2%, even if that risks a recession,” said Paul Thomas, vice president of capital markets at Zillow, in a research blog post. In congressional testimony on Wednesday, Fed Chairman Jerome Powell gave clear signals that markets should expect to see similar monetary-policy moves coming their way, which will likely cause mortgage rates to head further upward. 

As recently as early April, the 30-year mortgage rate averaged below 5%, and the pace of recent rate increases has stunned many mortgage lenders and consumers accustomed to friendlier conditions of 2021. 

“We should expect continued volatility over the coming days and weeks, as the market continues to reprice and tries to settle in at these rate levels,” said Robert Heck, vice president of mortgage at online marketplace Morty, in a statement sent to National Mortgage News. 

The impact of the movements are leaving a mark on the housing market, which has been noted by many research groups. 

“The combination of rising rates and high home prices is the likely driver of recent declines in existing-home sales,” said Sam Khater, Freddie Mac’s chief economist, in a press release. 

Earlier this week, the National Association of Realtors reported sales of previously-owned homes falling to a nearly 2-year low in May. New housing starts also came in lower last month, and a growing number of sellers also indicated they have cut asking prices in recent weeks. 

Lower sales volumes have also led to an ongoing spate of layoffs at mortgage companies, with JPMorgan Chase the latest to report staff reductions attributed to decreased homebuying demand.

As the 30-year rate edged upward, the 15-year fixed mortgage took a larger jump of 11 basis points to average 4.92%, increasing from 4.82% a week earlier. In the same time frame a year ago, the 15-year average was 2.34%.

The 5-year Treasury-indexed hybrid adjustable rate also climbed higher to an average of 4.41%, up 8 basis points from 4.33% a week earlier. One year ago, the 5-year ARM averaged 2.53%.