Mortgage Rates for September 15th

Mortgage rates surpassed 6% for the first time in 14 years as inflation has so far proved resilient to the Federal Reserve’s efforts to suppress it. The dramatically rapid escalation cooled what had been a hot US housing market, adding to the pressure on an economy plagued by relentless inflation.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed rate average rose to 6.02% with an average of 0.8 points. (A point is a commission paid to a lender equal to 1% of the loan amount. It is in addition to the interest rate.) It was 5.89% a week ago and 2.86% a year ago. The last time the 30-year fixed average was this high was in November 2008.

The 30-year fixed-rate mortgage, the most popular home loan product, has nearly doubled in the past nine months.

Freddie Mac, the federal mortgage investor, aggregates the rates of about 80 lenders across the country to compile weekly national averages. The survey is based on mortgages for the purchase of a home. The rates for refinancing can be different. He uses high quality borrower rates with strong credit scores and large down payments. Due to the criteria, these rates are not available to all borrowers.

Monthly rentals in South Florida this summer are more than 24 percent higher than a year ago, according to data. (Video: Luis Velarde / The Washington Post)

The 15-year fixed-rate average rose to 5.21 percent with an average of 0.9 points. It was 5.16 percent a week ago and 2.12 percent a year ago. The five-year adjustable rate average rose to 4.93 percent with an average of 0.2 points. It was 4.64 percent a week ago and 2.51 percent a year ago.

“Mortgage rates have risen for four weeks in a row due to investor concerns about inflation,” said Holden Lewis, home and mortgage expert at NerdWallet. “Their concerns are justified, as we learned this week that inflation rose more than expected in August, as evidenced by the consumer price index. That news caused mortgage rates to rise, a phenomenon that will be reflected in next week’s rates. The Federal Reserve already had plans to raise short-term rates next week in its effort to contain inflation. They could increase aggression in response to this week’s unexpectedly high inflation report, pushing mortgage rates further higher. “

Inflation data released this week by the Bureau of Labor Statistics revealed an acceleration in consumer prices in August, particularly for items like housing and food. The Consumer Price Index recorded a 0.7% increase in housing costs in August and an additional 6.2% annually, the largest increase since 1991.

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The August inflation reading surprised investors, who wonder if the Federal Reserve will consider raising the benchmark rate by 100 basis points, rather than 75 basis points as it did in July. (One basis point is 0.01 percentage points.) The Fed’s Rate Determination Committee is meeting next week.

In an effort to contain inflation, the central bank has raised the federal funds rate four times this year. It started with a 25 basis point increase in March, followed by a 50 basis point increase in May and 75 consecutive basis points in June and July. The Fed will likely want to see signs of falling inflation before retreating from the rate hike.

When investors are worried about inflation, their propensity to buy bonds decreases because the return on their investment is lower when inflation is high. Inflation erodes the value of a bond’s future payments. Lower demand causes bond prices to drop and yields to rise. As mortgage rates tend to follow the same path as the 10-year Treasury yield, they also rise.

The 10-year Treasury yield climbed to 3.42% on Tuesday before plunging to 3.41% on Wednesday, the highest level since mid-June.

“The higher-than-expected CPI gave the Fed permission to continue its 0.75 percentage point hike with some economists suggesting even a one percentage point hike would be possible,” said Nicole Rueth. manager of the production branch of the Rueth Team. “Mortgage rates have already fired into this move with the leap we’ve seen in the last couple of days.”

House prices are expected to fall but not collapse

Mortgage rates may not have peaked yet, Rueth said.

“Comparative inflation from a year ago still has us replace very low inflation in September 2021,” he said. “With today’s inflationary pressures – Russia, China and now the rail strike – we could see the September CPI – released in early October – even higher. Inflation in October 2021 has started the upward trend, so year-over-year comparisons will give us some relief. As inflation falls, mortgage rates also fall. “

Bankrate.com, which publishes a weekly index of mortgage rate trends, found that more than three-quarters of surveyed experts expect a rate hike in the coming week.

“Inflation remains large and problematic,” said Greg McBride, chief financial analyst at Bankrate.com. “The Fed will continue to be aggressive in raising rates and there is more supply of mortgage-backed bonds to be absorbed as the Fed pulls out.”

Calculate how much more mortgages will cost as interest rates rise

Meanwhile, higher rates have weakened mortgage demand to its lowest level in over two decades. The composite market index, a measure of total loan application volume, declined for the fifth consecutive week, dropping 1.2% last week, according to data from the Mortgage Bankers Association.

The refinancing ratio fell 4 percent and was 83 percent lower than a year ago. The buying index fell by 12%. The refinancing share of the mortgage business accounted for 30.2 per cent of applications.

“The mortgage market got off to a slow start during the first full week of September, as demand dropped due to a spike in mortgage rates last recorded in 2008,” Bob wrote in an email. Broeksmit, president and CEO of MBA. “With all eyes on the Federal Reserve’s next steps to tame high inflation, borrowers can expect continued mortgage rate volatility.”

Not only are there fewer borrowers applying for a mortgage, but those facing stricter lending standards. The MBA also released its Mortgage Credit Availability Index (MCAI), which showed a decline in credit availability in August. The MCAI slipped 0.5% to 108.3 last month. A decrease in the MCAI indicates that lending standards are tightening, while an increase signals that they are easing.

“The availability of mortgage credit declined slightly in August as investors cut back on their offers [adjustable-rate mortgages] and not[qualifying mortgage] lending programs, “said Joel Kan, MBA economist.” With the overall volume of origination projected to decline in 2022, some lenders continue to simplify their operations by abandoning certain lending programs to simplify their offerings. a worsening economic outlook and signs of a cooling rise in house prices, the propensity for riskier lending programs has been reduced.

“Offsetting these trends slightly, however, was a small increase in the new last month [home equity line of credit] products. With aggregate real estate holdings still at high levels, HELOCs could benefit borrowers who may not want to give up their current low mortgage rate but wish to use their real estate holdings to support other spending plans.

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