Mortgage rates rose 23 basis points this week, even closer to the 6% mark, as the market reacts to the Fed’s ongoing aggressive policies to combat persistent inflation.
According to the latest survey from Freddie Mac, the 30-year fixed-rate mortgage rose to an average of 5.89%, up from last week’s 5.66%. A year ago this time, rates averaged 2.88%. The index compiles only purchase mortgage rates reported by lenders during the past three days.
“Mortgage rates rose again as markets continue to manage the prospect of more aggressive monetary policy to combat elevated inflation,” Sam Khater, chief economist at Freddie Mac, said in a statement.
Mortgage rates started to rise faster after an economic policy symposium in Jackson Hole, Wyoming, on Aug. 26. Fed’s Chairman Jerome Powell said the Federal Open Market Committee (FOMC) would continue to be tightly focused on bringing inflation back down to its 2% goal.
In addition, Powell said that “Another unusually large increase could be appropriate at our next meeting,” referring to a 75 basis point increase in federal funds rates in September.
Mortgage rates tend to align with the 10-year U.S Treasury yield, which increased 12 basis points in one week to 3.27% Wednesday. Short-term rates, however, are higher, suggesting a recession on the horizon. The 2-year U.S. Treasury yield was at 3.45% on Wednesday, holding steady compared to the prior Wednesday.
With rising rates and inflation, non-QM lending has spent the last few months in choppy waters, with some lenders closing their doors. However, the outlook for non-QM for the rest of 2022 is relatively optimistic, according to Acra Lending CEO Keith Lind.
Presented by: Acra Lending
On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine measured the 30-year conforming mortgage rate at 5.950% Wednesday, up from 5.806% the previous week. Meanwhile, the 30-year fixed-rate jumbo was at 5.587% Wednesday, up from 5.572% the week prior.
Pressure on rates has reduced demand for mortgage loans, according to the Mortgage Bankers Association (MBA). The market composite index, a measure of mortgage loan application volume, declined 0.8% for the week ending Sep. 2. The refinance index had a 1% decline from the previous week, and the purchase index was down 0.65%.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 5.16% with an average of 0.8 points, up from last week’s 4.98%. The 15-year fixed-rate mortgage averaged 2.19% a year ago.
The 5-year ARM averaged 4.64% this week, up from 4.51% the previous week. The product averaged 2.42% a year ago.
To borrowers, Khater recommended shopping around for a better rate, as there is a dispersion on lenders’ offers. “Our research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional rate quote and an average of about $3,000 if they get five quotes.”