Mortgage rates jump higher again after jobs, inflation news

Recent forecasts of ongoing mortgage rate unpredictability are proving accurate, as the 30-year fixed reversed course following its steep drop last week by rising over 20 basis points, according to Freddie Mac.

After recording a one-week fall of 40 basis points — the largest since 2008 — the 30-year fixed-rate average jumped up to 5.51% from 5.3% for the seven-day period ending July 14, according to Freddie Mac’s Primary Mortgage Market Survey. In the same weekly period a year ago, the 30-year average was more than 2.5 percentage points lower at 2.88%.

“Mortgage rates are volatile as economic growth slows due to fiscal and monetary drags,” Freddie Mac Chief Economist Sam Khater said in a press release.

A better-than-expected jobs report helped reduce recession worries and led mortgage rates upward, according to Paul Thomas, vice president of capital markets at Zillow. Newly released Consumer Price Index data also showed inflation surging another 9.1% in June — the fastest pace in more than 40 years — further driving expectations the Federal Reserve will raise its interest rate. 

“Even with this increase in inflation, markets remain volatile as investors try to balance Fed rate increases with recession risk,” Thomas said in a research statement. 

Investors are closely watching for signals from central-bank officials, with the Federal Open Market Committee scheduled to meet at the end of July, for signals about what appropriate monetary policy might look like based on the developments.

For many active in the mortgage and banking industries, the looming question is just how large upcoming Fed rate hikes will be. “The accelerating inflation means there’s a lot more work for the Federal Reserve to do,” said Mark Fleming, chief economist at First American, in a statement. “Another 75-point increase in the federal funds rate is almost assured.” Other economists have even floated the prospect of a 100-basis-point rise.

And vectors are pointing to additional increases in the months ahead, Fleming said. “One headwind for the Fed’s fight against inflation — shelter inflation is delayed up to six to 12 months. Rapid growth in rent expense over the last year is only now beginning to hit the headline CPI figure, which means there’s more upward pressure to come.”

Meanwhile, economic releases in the next several days looking at jobless claims and retail sales could also influence the direction of mortgage rates in the short term. 

Alongside the 30-year rate jump, the 15-year average experienced a similar large spike, rising 22 basis points to 4.67% from 4.45% one week earlier. In the same seven-day period in 2021, the 15-year fixed mortgage averaged 2.22%. 

The 5-year Treasury-indexed hybrid adjustable rate also came in higher, climbing to 4.35% from 4.19% the prior week. One year ago, the 5-year ARM averaged 2.47%.