Mortgage rates top 7% for the first time in over 20 years

Conforming mortgage rates as measured by Freddie Mac topped 7% this week for the first time in over 20 years, increasing by 14 basis points from the previous week.

The average for the 30-year Fixed Rate loan for the week of Oct. 27 was 7.08%, compared with 6.94% one week earlier and 3.14% for this time last year, its primary mortgage market survey found.

“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month,” said Sam Khater, Freddie Mac’s chief economist, in a press release. “In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”

The last time the Freddie Mac survey had the 30-year FRM over 7% was for the week of April 5, 2002, when it was at 7.13%.

The Freddie Mac data echoes this week’s Mortgage Bankers Association’s Weekly Application Survey, which put the 30-year conforming mortgage at 7.16%.

But the static weekly data does not portray some of the volatility in the market.

Data from Optimal Blue, a division of Black Knight, first put the conforming mortgage over 7% on Oct. 19, at 7.026%. It peaked at 7.159% on Oct. 24 before declining over the next two days to 7.009% on Oct. 26, a drop of 15 bps over two days and 2 bps from the prior week.

The benchmark 10-year Treasury, which dropped just below 4% at one point on Wednesday before closing at 4.01%, was at 3.97% at 10 A.M. Thursday morning. It closed at 4.23% on Oct. 24.

Zillow’s tracker had the 30-year fixed at 6.78% on the morning of Oct. 27, down 4 bps from the previous day’s 6.82%. That was down 11 bps from the previous week’s average rate of 6.89%.

But the Zillow tracker did put the rate above 7% for much of the past week.

“Mortgage rates fell this week, touching 20-year highs before retreating considerably in recent days,” Matthew Speakman, Zillow senior economist, said in a statement issued Wednesday night. “The sharp reversal over the past few trading sessions — a rarity these days — suggests that investors may finally be expecting some moderation in the Fed’s pace of monetary policy tightening and some softening in key economic data releases — the two factors that have combined to push rates firmly higher this year.”

If anything, the markets are in a holding pattern until they get more data to analyze, Speakman said. And that additional information is coming soon.

“Next week’s Federal Reserve announcement is sure to move markets, as will the October jobs report that will arrive two days later,” Speakman said. “Any indications that the Fed plans to maintain, or even accelerate its previously stated plans for tightening monetary policy would almost certainly send mortgage rates higher once again.”

The other rates tracked by Freddie Mac also made double digit increases. The 15-year FRM rose to 6.36%, up 13 bps from 6.23% a week ago, and 2.37% at this time in 2021.

Meanwhile the 5/1 Treasury-indexed hybrid adjustable rate mortgage averaged 5.96%, a gain of 25 bps from 5.71% last week. For the same week in 2021, it averaged 2.56%.