Mortgage rates continued their upward trajectory this week, with the 30-year fixed-rate mortgage (FRM) surging from 5.23% last week to 5.78% this week, according the latest Primary Mortgage Market Survey (PMMS), released by Freddie Mac Thursday.
Key findings:
- 30-year fixed-rate mortgage averaged 5.78% with an average 0.9 point as of June 16, 2022, up from last week when it averaged 5.23%. A year ago at this time, the 30-year FRM averaged 2.93%.
- 15-year fixed-rate mortgage averaged 4.81% with an average 0.9 point, up from last week when it averaged 4.38%. A year ago at this time, the 15-year FRM averaged 2.24%.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.33% with an average 0.3 point, up from last week when it averaged 4.12%. A year ago at this time, the 5-year ARM averaged 2.52%.
What the experts are saying:
“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987,” said Sam Khater, Freddie Mac’s chief economist. “These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”
Hannah Jones, economic data analyst at realtor.com®, commented, “The Freddie Mac fixed rate for a 30-year loan continued climbing this week, increasing 55 basis points to 5.78%, in response to last week’s inflation data and in anticipation of this week’s increase in the target Federal Funds rate. This is the largest single-week jump in more than three decades. The 10-year treasury yield climbed to 3.48% on Tuesday, the highest yield in 11 years, as investors anticipated Wednesday’s interest rate hike. The Federal Reserve raised the interest rate target by 75 basis points, the largest increase in almost three decades. Fed Chair Jerome Powell’s comments emphasized the Fed’s commitment to bringing inflation down to the 2.0% goal by continuing to raise rates. Chair Powell acknowledged the departure from expectations, stating that the decision to increase interest rates by 75 basis points instead of 50 was driven by last Friday’s inflation data and expectations moving forward.
“Climbing mortgage rates continue to put pressure on the housing market, pushing the cost of homeownership ever higher. Although rates tracked by Freddie Mac remain in the 5s, other mortgage surveys showed interest rates exceeding 6% early this week in response to inflation data which increased to 8.6% in May. This represents a 40-year high, with the biggest contributors being food, shelter and gasoline. There has been little relief for American consumers at the grocery store, the pump, and in both the for-sale and rental markets. The median list price for a home in the U.S. was $447,000 in May, up 18% since May 2021, and mortgage rates rose more than 2 percentage points in the same timeframe. This means that it is about 65%, or $820 a month, more costly to finance 80% of the median priced U.S. home now than it was in May 2021, dwarfing conventional inflation measures. However, the housing market is showing signs of balancing, as more houses were listed for sale this week compared to the same week last year, offering more options to buyers. To contend with the seemingly ever-climbing price of purchasing a home, some buyers are looking to relatively affordable locales or opting out of the purchase market altogether, choosing to rent instead, despite the fact that those annual costs are also climbing,” Jones concluded.
