30-Year Mortgage Rates Pushing 6% Again

After reaching 6.28% on June 14th, 30-year mortgage rates decreased to a low of 5.05% on August 1st according to Mortgagenewsdaily.com. Since then, rates have been moving up, and rates increased today to 5.95%, probably due to Fed Chair Powell’s speech on Friday.

A few key excerpts from Powell’s speech that impacted rates:

While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.
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July's increase in the target range was the second 75 basis point increase in as many meetings, and I said then that another unusually large increase could be appropriate at our next meeting. We are now about halfway through the intermeeting period. Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook. At some point, as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases.

Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.

Not only was Powell suggesting that a 75bp rate hike was possible in September (although most analysts expect 50bp), but he also cautioned against the view of a “pivot” in 2023 with the Fed cutting rates.

What are current rates?

Here is a graph from Mortgagenewsdaily.com that shows the 30-year mortgage rate since 2010.

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 August 19th:

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.65 percent from 5.45 percent, with points increasing to 0.68 from 0.57 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

And Freddie Mac reported last week:

“The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “Home sales continue to decline, prices are moderating, and consumer confidence is low. But, amid waning demand, there are still potential homebuyers on the sidelines waiting to jump back into the market.”

• 30-year fixed-rate mortgage averaged 5.55 percent with an average 0.8 point as of August 25, 2022, up from last week when it averaged 5.13 percent. A year ago at this time, the 30-year FRM averaged 2.87 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.

I’ll have more concerning the impact on affordability after the Case-Shiller house price index is released tomorrow.