July 14 Mortgage Rates

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After the biggest one-week drop since 2008, mortgage rates have started to rise again.

According to data released Thursday by Freddie Mac, the 30-year fixed rate average jumped to 5.51% 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 added to the interest rate.) It was 5.3% a week ago and 2.88% a week ago. one year old.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to arrive at weekly national averages. The survey is based on mortgages on the purchase of a home. Refinance rates may be different. The survey uses rates for high quality borrowers with strong credit scores and large down payments. Due to criteria, these rates are not available to all borrowers.

The average of 15-year fixed rates climbed to 4.67% with an average of 0.8 points. It was 4.45% a week ago and 2.22% a year ago. The average of the adjustable rates over five years rose to 4.35% with an average of 0.2 points. It was 4.19% a week ago and 2.47% a year ago.

Calculate the cost of additional mortgages as interest rates rise

“Mortgage rates are rising again because inflation is higher than investors expected,” said Holden Lewis, real estate and mortgage expert at NerdWallet. “Your mortgage rate is the price of borrowing money, and the price of money goes up when inflation is high.”

A report released this week showed little progress in tackling inflation. The consumer price index rose 9.1% year over year, climbing at its fastest pace in four decades.

Inflation continued its torrid rise in June

With June inflation outpacing May, investors are wondering if the Federal Reserve will consider raising its benchmark rate by 100 basis points, rather than 75 basis points as it did in June. (One basis point is equal to 0.01 percentage point.) Canada recently raised interest rates by one percentage point, the largest increase since 1998. The Fed’s rate-setting committee meets this month.

“Inflation is in beast mode, hitting a high not seen since 1981,” said Elizabeth Rose, sales manager at Mortgage300. “We all feel it in our wallet. This upward move will likely prompt the Fed to hike another 75 basis points, and Fed futures are pointing to nearly a 50-50 chance of a 100 basis point hike.

When investors worry about inflation, their appetite for buying bonds decreases because the return on their investment is lower when inflation is high. Inflation erodes the value of a bond’s future payments. A drop in demand causes bond prices to fall and yields to rise. Since mortgage rates tend to follow the same path as the 10-year Treasury yield, they also rise.

But investors are also worried about a recession. In times of recession, bonds are considered a safe investment. Increased demand for bonds leads to higher prices and lower yields, which generally lowers mortgage rates.

“A higher-than-previous and higher-than-expected CPI indicates inflation is not under control,” said Dick Lepre, loan officer at CrossCountry Mortgage. “Another Fed hike is a certainty even as we enter a recession.”

Stubborn prices greatly increase recession risks

Bankrate.com, which publishes a weekly index of mortgage rate trends, found that half of surveyed experts expect rates to fall over the coming week.

“Inflation hits a new 40-year high and forces the Fed to remain aggressive on interest rates,” said Greg McBride, chief financial analyst at Bankrate.com. “But accelerating rate hikes might actually be better for mortgage rates because it increases the timing of when inflation and interest rates peak.”

Meanwhile, mortgage applications fell last week. The composite market index – a measure of the total volume of loan applications – fell 1.7% from the previous week, according to data from the Mortgage Bankers Association.

Refinancings accelerated as rates fell, but they weren’t enough to offset a decline in purchase requests. The refinancing index rose 2% from the previous week, but was 80% lower than a year ago. The purchase index fell 4%. The refinancing share of mortgage activity represented 30.8% of applications.

After hitting a record high of $460,000 in March, the average purchase loan amount fell to $415,000 last week.

“Mortgage applications declined in the first full week of July as higher mortgage rates continue to dampen borrower demand for refinances and home purchases,” wrote Bob Broeksmit, president and CEO. of MBA, in an e-mail. “Inflationary pressures and declining affordability conditions have forced some potential buyers to delay their search for accommodation this summer; however, the labor market is still strong, housing stock is increasing, and house prices and mortgage rates are moderating. Demand could increase in the coming months if these trends continue.

The MBA also released its Mortgage Credit Availability Index (MCAI), which showed that credit availability declined in June. The MCAI slipped 0.3% to 119.6 last month. A decrease in the MCAI indicates that lending standards are tightening, while an increase indicates that they are loosening.

“Significantly higher mortgage rates than a year ago have slowed refinancing and buying activity and impacted the overall mortgage lending landscape,” MBA economist Joel Kan said in a statement. “Credit availability varied by loan type, with the conventional index up 1.2% and the government index down 1.7%. … With higher rates and high home prices, more potential buyers are asking for ARMs, but activity remains below historical averages.

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