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US Mortgage Rates Jump on US Inflation Numbers

In the week ending July 15, mortgage rates bounced back from a two-week slump.

30-year fixed rates jumped by 21 basis points, partially reversing a 40-basis point tumble from the previous week to end the week at 5.51%.

Year-on-year, 30-year fixed rates were up by 263 basis points and by 57 basis points since the November 2018 peak of 4.94%.

Economic Data from the Week

US inflation figures contributed to the upswing in mortgage rates. In June, the US annual rate of inflation accelerated from 8.6% to 9.1%. Economists had forecast a rate of 8.8%.

The pickup in inflationary pressures, together with the nonfarm payroll figures, led to the talk of a 100-basis point rate hike later in the month.

However, fears of an economic recession limited the rise in mortgage rates that failed to reverse losses from the week prior.

Freddie Mac Rates

The weekly average rates for new mortgages, as of July 15, 2022, were quoted by Freddie Mac to be:

  • 30-year fixed rates jumped by 21 basis points to 5.51%. This time last year, rates stood at 2.88%. The average fee held steady at 0.8 points.
  • 15-year fixed rates surged by 22 basis points to 4.67% in the week. Rates were up by 245 basis points from 2.22% a year ago. The average fee remained unchanged at 0.8 points.
  • 5-year fixed rates increased by 16 basis points to 4.35%. Rates were up by 188 basis points from 2.47% a year ago. The average fee decreased from 0.4 points to 0.2 points.

According to Freddie Mac,

  • Mortgage volatility persisted as economic growth slowed due to fiscal and monetary policy.
  • With rates at their highest in over a decade, house prices at elevated levels, and inflation hitting consumers, affordability remained the main issue for homebuyers.

Mortgage Bankers’ Association Rates

For the week ending July 8, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 5.74%. Points fell from 0.65 to 0.59 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 5.60% to 5.49%. Points increased from 0.89 to 1.08 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 5.28% to 5.25%. Points decreased from 0.44 to 0.38 (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, fell by 1.7% in the week ending July 8. The Index decreased by 5.4% in the week prior.

The Refinance Index increased by 2% and was 80% lower than the same week one year ago. In the previous week, the Index slid by 8%.

The refinance share of mortgage activity increased from 29.6% to 30.8%. In the previous week, the refinance share declined from 30.3% to 29.6%.

According to the MBA,

  • While mortgage rates were relatively steady, applications fell for a second week in a row.
  • High mortgage rates and the weaker economic outlook weighed on applications.
  • Average purchase loan sizes were in decline, weighed by the prospect of slower home price growth and weaker purchase activity at the upper end of the market.

For the week ahead

It is a quiet week ahead on the US economic calendar. Housing sector numbers are due out in the first half of the week. Weak housing sector data could weigh on mortgage rates, with little else for the markets to consider.

On the monetary policy front, the Fed entered the blackout period on Saturday to sideline monetary policy chatter until the July policy decision.