Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to arrive at weekly national averages. The survey is based on mortgages on the purchase of a home. Refinance rates may be different. It uses rates for high quality borrowers with strong credit scores and large down payments. Due to criteria, these rates are not available to all borrowers.
The average of 15-year fixed rates jumped to 4.17% with an average of 0.9 points. It was 3.91% a week ago and 2.35% a year ago. The average of the revisable rates over five years rose to 3.69% with an average of 0.3 points. It was 3.56% a week ago and 2.8% a year ago.
“The Freddie Mac fixed rate for a 30-year loan maintained momentum this week as markets reacted to the latest consumer price data, which accelerated in March at a pace not seen since 1981,” said George Ratiu, head of economic research at Realtor.com, said. “After approaching 2.8% earlier this week, the 10-year Treasury fell slightly as investors took the slight moderation in the core consumer price index as a signal that we have reached a low. inflation peak. However, hopes of a cooling may be premature, given the jump in producer prices, which have risen at the fastest pace on record.
Mortgage rates are pushed up by rising inflation. The consumer price index, released Tuesday by the Bureau of Labor Statistics, showed prices rose 8.5% in March from a year ago. It was the largest annual increase since December 1981. On Wednesday, the BLS released the March Producer Price Index, which tracks prices paid by wholesalers. It climbed 11.2% from a year ago, its biggest gain since 2010.
Prices rose 8.5% in March compared to 2021, driven by energy costs
Inflation causes fixed-income investments like bonds to lose value, which is why investors demand more in return for holding them. When yields rise sharply, it’s because investors want to be paid more for long-term loans.
This week, the 10-year Treasury note hit 2.79% on Monday. It has fallen in recent days, closing at 2.7% on Wednesday. The 10-year yield started the year at 1.63% and just over a month ago was below 2%.
Since mortgage rates tend to follow the same trajectory as long-term bonds, they have also risen.
“Inflation pushes mortgage rates up in two ways,” said Holden Lewis, real estate and mortgage expert at NerdWallet. “First, interest is the price we pay for money, and the price of money goes up like everything else. Second, the Federal Reserve raises interest rates to control inflation. These forces work together to drive up mortgage rates.”
It’s not just rising interest rates that are making home loans more expensive. Effective April 1, the Federal Housing Finance Agency implemented increased fees for certain Fannie Mae and Freddie Mac home loans. Mortgages that the FHFA considers “high balance” or mortgages for a second home are now more expensive.
High balance loans are mortgages above the national compliant benchmark limit ($647,200). Fees for high balance loans have increased by 0.25 to 0.75%, depending on the loan-to-value ratio. Fees for secondary real estate loans increased between 1.125 and 3.875%, scaled by loan-to-value ratio.
Bankrate.com, which publishes a weekly index of mortgage rate trends, found that more than half of surveyed experts expect rates to rise in the coming week.
“The Fed is in full sell-off mode on 10-year Treasuries,” said Ken H. Johnson, a real estate economist at Florida Atlantic University. “Last week, more than 20% of the 10-year market volume was sold by the Fed. With such unilateral activity, long-term mortgage rates, which track 10-year Treasury yields, can only rise.
Meanwhile, mortgage applications fell again last week. The composite market index – a measure of the total volume of loan applications – fell 1.3% from the previous week, according to data from the Mortgage Bankers Association.
The Refinance Index slipped 5% and was down 62% from a year ago. The volume of refinancing requests remains at its lowest level since the spring of 2019. The purchase index increased by 1%. The refinancing share of mortgage activity accounted for 37.1% of applications.
“Higher rates increase borrower interest in ARMs,” MBA economist Joel Kan said in a statement. “Their share of requests last week was 7.4%, which was the highest share since June 2019. A promising sign of strong buying demand amid struggling affordability, requests for conventional and governmental purchases have increased.”