Aggressive monetary policy pushes mortgage rates up

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Freddie Mac published the results of its Core Mortgage Market Survey (PMMS), showing that the 30-year Fixed Rate Mortgage (FRM) had averaged 5.66%.

“Renewed market perception of more aggressive monetary policy has pushed mortgage rates to almost double what they were a year ago,” said Sam Khater, chief economist at Freddie Mac. “The increase in mortgage rates comes at a particularly vulnerable time for the housing market, as sellers recalibrate prices due to weaker buying demand, which will likely lead to a continued deceleration in price growth. “

New data summary:

  • The 30-year fixed rate mortgage averaged 5.66% with an average of 0.8 points as of September 1, 2022, up from last week when it averaged 5.55%. A year ago, at this time, the 30-year FRM averaged 2.87%.
  • A 15-year fixed rate mortgage averaged 4.98% with an average of 0.8 points, up from last week when it averaged 4.85%. A year ago at the same date, the 15-year FRM averaged 2.18%.
  • The 5-year Treasury-linked hybrid variable rate (ARM) mortgage averaged 4.51% averaging 0.4 points, up from last week when it averaged 0.4 points. 4.36%. Last year at this time, the 5-year ARM averaged around 2.43%.

“The Freddie Mac fixed rate for a 30-year loan maintained its bullish momentum this week, hitting 5.66%, following the rise in the 10-year Treasury,” said Realtor.com’s director of economics research, George Ratiu. “Financial markets continue to react to the Federal Reserve’s strong commitment to tightening the money supply to bring inflation closer to the 2% mark. Remarks this week from Cleveland Fed Chairman Mester , which is also a voting member of the FOMC, made clear the current policy stance, saying the Fed should raise the benchmark rate above 4% by early 2023 and hold it steady until next year. The current policy rate is between 2.25% and 2.5%, indicating expectations for aggressive rate hikes over the coming months.”

PMMS focuses on conventional, conforming, fully amortized home purchase loans for borrowers who are down 20% and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey. To see other terms and definitions, Click here.

“Homebuyers can expect mortgage rates to remain in the 5% to 6% range for the next few months as the combination of still high inflation and rising borrowing costs from the Fed will keep them high,” Ratiu said. “With rates about 250 basis points higher than a year ago, the median monthly payment will approach $2,000, about 60% higher than last year. This will challenge many first-time buyers, especially since wages are only increasing by 5% per year.The silver lining for those still looking for a home is that homes stay on the market longer, prompting sellers to lower prices. asking prices and leaves more room for negotiation. Some buyers may find deeper and deeper discounts, providing opportunities that fit their budgets.”

Freddie Mac continues to make homeownership possible for millions of families and individuals by providing mortgage capital to lenders. Since their creation by Congress in 1970, they have made housing more accessible and affordable for buyers and renters in communities across the country. Fannie Mae is committed to building a better housing finance system for buyers, renters, lenders, investors and taxpayers.

To read the full press release, Click here.

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