Mortgage Rates Rise A Bit Following Fed Hike

Mortgage rates increased for the first time in five weeks in the wake of the Federal Reserve’s rate hike, according to Freddie Mac.

The enterprise’s weekly Primary Mortgage Market Survey (PMMS), released Thursday, showed that the 30-year fixed-rate mortgage averaged 6.12%, a 3-basis-point increase from the previous week.

“Following an interest rate hike from the Federal Reserve and a surprisingly strong jobs report, mortgage rates increased slightly this week,” said Sam Khater, Freddie Mac’s chief economist. “The 30-year fixed-rate continues to hover close to 6%, and interested homebuyers are easing their way back to the market just in time for the spring homebuying season.”

According to the PMMS:

• The 30-year fixed-rate mortgage averaged 6.12% as of Feb. 9, up from 6.09% last week. A year ago, it averaged 3.69%.
• The 15-year fixed-rate mortgage averaged 5.25%, up from 5.14% last week. A year ago at this time, it averaged 2.93%.

Freddie Mac’s PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. 

Rates React To Fed

George Ratiu, manager of economic research for Realtor.com, said the rebound in mortgage rates was due, in part, to last week’s stronger-than-expected jobs report, which showed the U.S. economy added a startling 517,000 jobs in January.

“Investors reacted to the stronger than expected employment data and Fed Chairman [Jerome] Powell’s remarks, which highlighted that — in light of the resilient economy — the central bank expects inflation to remain higher for a longer period, requiring sustained monetary tightening,” he said. 

“The tension between expectations and economic data will continue to permeate financial markets for several more months,” Ratiu continued. “On the one hand, investors have been expecting the economy to fall into a recession following the Fed’s rate hikes, assuming that higher borrowing costs will make it ever more challenging for consumers to continue spending on credit. On the other hand, the combination of a strong job market and pandemic savings mean that Americans have maintained a steady consumption pace even as they switched their focus from goods to services.” 

Ratiu said mortgage rates are likely to continue moving up and down in a narrow range for the next few weeks. 

“For housing markets, current rates remain a significant barrier to affordability, especially for first-time homebuyers,” he said. “At the same time, there are several undercurrents which continue to reshape market dynamics.”

Those undercurrents include employment still running at a strong pace, causing wages to continue to rise, putting more money in households’ budgets. 

“Simultaneously, median list prices have declined 11% from their summer peak, resulting in lower down payments and monthly mortgage costs,” he said of the housing market. “In addition, with interest rates still running well-below the 7% range we saw in the fall, the psychological shock of the 2022 rate jump is wearing off for buyers, leading to a favorable adjustment in expectations.”