30-Year Mortgage Rates Decrease to 5.50%

After reaching 6.28% on June 14th, 30-year mortgage rates have decreased to 5.50% today according to Mortgagenewsdaily.com. The 10-year Treasury yield has fallen to 2.82%, apparently on “recession fears”, even though it is pretty clear the economy is not in a recession.

In April, I wrote: How High will Mortgage Rates Rise? In that post, I included a simple method for estimating 30-year mortgage rates based on the 10-year Treasury yield.

Housing economist Tom Lawler explained that the relationship is more complicated in Lawler: Mortgage/Treasury Spreads, Part I and Lawler: Mortgage/Treasury Spreads Part II: “Decomposing” the Widening This Year.

What are current rates?

Here is a graph from Mortgagenewsdaily.com that shows the 30-year mortgage rate since 2010. Although mortgage rates have fallen sharply over the last 2 weeks, rates are still much higher than earlier this year.

It is the sharp increase in monthly payments compared to earlier this year that is impacting the housing market.

The Mortgage Bankers Association’s (MBA) reported last week that as of June 24th:

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.84 percent from 5.98 percent, with points decreasing to 0.64 from 0.77 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

And Freddie Mac reported last week:

“The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession,” said Sam Khater, Freddie Mac’s Chief Economist. “This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller’s market to a more normal pace of home price appreciation.”

• 30-year fixed-rate mortgage averaged 5.70 percent with an average 0.9 point as of June 30, 2022, down from last week when it averaged 5.81 percent. A year ago at this time, the 30-year FRM averaged 2.98 percent.

All of these measures move together over time (and the Freddie Mac PMMS is used for historical data), however when rates are moving quickly - like over the last few days -mortgagenewsdaily.com is the most up to date.

The sharp increase in rates in mid-June was related to a stronger than expected CPI report. Since then, inflation readings have been closer to expectations.