Mortgage rates ticked up again this week, seemingly caught in an ongoing cycle of upward pressure as renewed tensions in the Middle East drive oil prices higher, stoke inflation concerns and push Treasury yields up, bringing mortgage rates along with them.
This past week, rates reached a 14-month high at 6.76% for the average 30-year fixed-rate mortgage (FRM), according to the latest Freddie Mac Primary Mortgage Market Survey® released Thursday. This is up from 6.71% last week. The 30-year FRM also is up year-over-year from 6.35% last year. The 15-year FRM averaged 6.09%, up from 6.04% last week and up from last year when it averaged 5.50%.
At presstime, the average rate has crossed the 7% mark for the first time in over a year, sitting at 7.07% Thursday afternoon.
Realtor.com Senior Economist Anthony Smith said the five-basis-point increase from the previous week and 14-month high is the result of economic conditions created by continued escalation of tensions in the Middle East.
“Each round of renewed tensions has reinforced the same dynamic that has driven rates higher since late February,” he said. “Oil prices rise, inflation fears follow, and bond markets reprice accordingly.”
Smith noted that despite the August’s jobs report coming in above consensus expectations, with payrolls increasing 162,000 and prior months revised upward, the strong jobs report barely moved the odds of a rate hike at the September FOMC meeting.
“The Fed’s attention, along with the bond market’s, is almost entirely on inflation right now,” Smith said. “That puts this week’s CPI release in the spotlight as the decisive data point ahead of the September 15-16 meeting. A hotter-than-expected reading would strengthen the case for a hike and add further pressure on mortgage rates. A cooler one could offer some relief, though the odds of a hike are already split nearly down the middle.”
Smith noted that the August pending sales data showed growth turned negative for the first time since last November and while pricing and delisting trends are slightly more encouraging, they haven’t been enough to offset the drag from elevated rates.
“Normal seasonal patterns will weigh on activity into fall as well,” Smith added. “The market that could have been, with rates below 6% and spring momentum building, feels increasingly distant. Until there is meaningful relief on inflation or a durable resolution to the conflict in Iran, that backdrop is unlikely to change.”
Freddie Mac Chief Economist Sam Khater reminded home shoppers that even with rates ebbing and flowing at elevated levels some savings can be found by shopping the rate. “Aspiring buyers should remember shopping around for the best mortgage rate and getting multiple quotes can potentially save them thousands.”
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