Mortgage rates increased 15 basis points this week as the benchmark 10-year Treasury yield broke above the 4% mark for the first time since November.
The Freddie Mac Primary Mortgage Market Survey found the 30-year fixed loan rose to 6.65%
For the same week
Meanwhile, the 15-year FRM increased 13 basis points to 5.89% for the week of March 2. Last week the rate was at 5.76%, while last year this product averaged 3.01%.
"As we started the year, the 30-year fixed-rate mortgage decreased with expectations of lower economic growth, inflation and a loosening of monetary policy," said Sam Khater, Freddie Mac chief economist, in a press release. "However, given sustained economic growth and continued inflation, mortgage rates boomeranged and are inching up toward 7%."
Rising rates are a function of bond investors repricing inflation risk, said Orphe Divounguy, senior macroeconomist at Zillow Home Loans, in a statement issued Wednesday night. After several positive reports, the markets have been roiled by news that inflationary pressures have not cooled, including most recently, January's Personal Consumption Expenditures Price Index, which came in higher than expected.
Zillow's rate tracker as of Thursday morning reported a 20 basis point week-to-week increase for the 30-year FRM to 6.73%.
Furthermore, Minneapolis Federal Reserve President Neel Kashkari is indicating he might
"With the Fed firmly focused on wage growth, February employment data could cause more policy uncertainty and higher mortgage rate volatility," Divounguy said. "Cooling wage growth in next week's jobs report could send mortgage rates back down."
At noon on Thursday, the 10-year Treasury was at 4.08%, up 9 basis points on the day, and 20 basis points from its close on Feb. 23.
The Fed "is not about to back off instituting more rate hikes in the next few FOMC meetings while it waits to see the desired impact on taming inflation," Rajeev Dhawan of the Economic Forecasting Center at Georgia State University's J. Mack Robinson College of Business said in a statement Wednesday. "Real moderation will arrive in terms of lack of job growth, which will first appear in the corporate sector, due to cautious CEOs and chief financial officers who do not anticipate runaway consumer spending prospects in the next 12 months."
He predicted job losses will begin to
"This will be a cue for the Fed to start cutting rates aggressively, likely beginning by the end of 2023 and intensifying sharply in 2024, for a total of 200 basis points," Dhawan said.
The rise in rates have dampened the early 2023 enthusiasm for residential real estate.
"Lower mortgage rates back in January brought buyers back into the market," Khater said. "Now that rates are moving up, affordability is hindered and making it difficult for potential buyers to act, particularly for repeat buyers with existing mortgages at less than half of current rates."
A longer term view is more appropriate, said First American Chief Economist Mark Fleming.
"While rates may bounce around on a week-to-week basis as new economic reports shift the outlook for inflation, the industry expectation is that inflation will improve throughout the year, said Fleming earlier this week when the title insurer released its Real House Price Index.
"As a result, if rates move lower throughout the year and affordability continues to improve, it could encourage both buyers and sellers to jump back into the market," he concluded.
