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US Mortgage Rates Inch Higher on Powell Testimony

In the week ending June 23, mortgage rates rose for the third time in six weeks.

30-year fixed rates rose by three basis points to 5.81%. In the week prior, 30-year fixed rates surged by 55 basis points.

Year-on-year, 30-year fixed rates were up by 279 basis points and 87 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a quiet first half of the week, with no US stats to provide US Treasuries and mortgage rates with direction.

While there were no stats for the markets to consider, Fed Chair Powell gave testimony on Capitol Hill, which drew plenty of interest.

In line with market expectations, Fed Chair Powell discussed the need to continue hiking rates to bring inflation back to target.

According to FX Empire, Powell noted,

“We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”

For riskier assets, Powell’s reference to the influence of incoming data and the economic outlook on the Fed interest rate path eased immediate concerns of a hard landing.

The relief was brief, however, with the Q&A session highlighting the Fed’s threat to the US economy.

Powell talked of the need to bring inflation to target at any cost, reigniting fears of a US recession driven by Fed monetary policy.

Freddie Mac Rates

The weekly average rates for new mortgages, as of June 23, 2022, were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 3 basis points to 5.81%. This time last year, rates stood at 3.04%. The average fee fell from 0.9 points to 0.8 points.
  • 15-year fixed rates rose by 11 basis points to 4.92% in the week. Rates were up by 258 basis points from 2.34% a year ago. The average fee remained unchanged at 0.9 points.
  • 5-year fixed rates increased by 8 basis points to 4.41%. Rates were up by 188 basis points from 2.53% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • Since the start of the year, fixed mortgage rates were up by more than two percentage points.
  • High house prices and rising rates are likely the reasons behind the downward trend in existing home sales.
  • Despite this, many potential homebuyers remain interested in purchasing a home.

Mortgage Bankers’ Association Rates

For the week ending June 17, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances increased from 5.65% to 5.98%. Points rose from 0.71 to 0.77 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA increased from 5.36% to 5.62%. Points rose from 1.00 to 1.18 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 5.25% to 5.49%. Points fell from 0.54 to 0.45 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, increased by 4.2%. The Index rose by 6.6% in the week prior.

The Refinance Index fell by 3% and was 77% lower than the same week one year ago. In the previous week, the Index increased by 4%.

The refinance share of mortgage activity decreased from 31.7% to 29.7%. In the previous week, the refinance share decreased from 32.2% to 31.7%.

According to the MBA,

  • Mortgage rates continued to rise, with the 30-year fixed mortgage rate hitting the highest level since November 2008.
  • The 30-year fixed mortgage rate saw the largest weekly increase since 2009.
  • Fed monetary policy delivered the rise, as mortgage rates responded to the Fed’s 75 basis point rate hike.
  • Over the last 12 months, refinance volume slumped by 77% due to mortgage rates doubling over the same period.
  • Purchase activity was 10% lower than a year ago despite a recent rise in purchase applications.
  • Mortgage rates and tight inventories continue to peg back purchasing activity.

For the week ahead

It is a relatively busy first half of the week, with key stats from the US, including durable goods and core durable goods orders, consumer confidence, and Q2 GDP numbers.

Barring any revisions to the GDP numbers, the core durable goods orders and consumer confidence figures will likely have the greatest influence on mortgage rates.

Central bank chatter will also provide direction, however, with Fed Chair Powell due to speak on Wednesday.