Rates Surge In Largest One-Week Increase On Record

Mortgage rates exploded this week, rising from an average of 5.23% to 5.78%, Freddie Mac reported Thursday. 

It is the largest one-week increase in the history of the GSE’s survey, which dates back to 1987.

Freddie’s Primary Mortgage Market Survey (PMMS) found that the 30-year fixed-rate mortgage (FRM) averaged 5.78%, up from last week’s 5.23%. A year ago at this time, the 30-year FRM averaged 2.93%.

“These higher rates are the result of a shift in expectations about inflation and the course of monetary policy,” said Sam Khater, Freddie Mac’s Chief Economist.

“Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”

The Federal Reserve on Wednesday raised interest rates by 0.75%, its largest hike in a single meeting since 1994.

Chairman Jerome Powell said the Federal Reserve is watching prices carefully but declined to speculate on the hike’s potential impact. “How much will it really affect residential investment? Not really sure. How much will it affect housing prices? Not really sure,” he said.

“So it’s a complicated situation and we watch it very carefully. I’d say if you are a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset.”

But a reset won’t come if inflation and home price appreciation persist at current levels.

“The question is how fast can the Fed get inflation down low enough to stop the rising mortgage rates,” Gregory Heym, chief economist at Brown Harris Stevens, told Forbes.

Additional findings from Thursday’s report:

  • 15-year fixed-rate mortgage averaged 4.81% with an average 0.9 point.
  • A year ago at this time, the 15-year FRM averaged 2.24%.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.33% with an average 0.3 point.
  • A year ago at this time, the 5-year ARM averaged 2.52%.