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Mortgage Rates Top 6% For First Time Since 2008

Steve Goode
Sep 15, 2022
Freddie Mac announced that its Credit Risk Transfer (CRT) program transferred approximately $2.5 billion of credit risk on $69 billion of single-family mortgages from taxpayers to the private sector during the third quarter of this year

Economist: First-time homebuyers finding the door to homeownership 'closed for the season.'

Freddie Mac’s weekly Primary Mortgage Market Survey report released Thursday shows that fixed mortgage rates topped 6% for the first time since 2008, as they continued to rise alongside hotter-than-expected inflation numbers, said Sam Khater, Freddie Mac’s chief economist.

“Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate,” Khater said. “This indicates that while home-price declines will likely continue, they should not be large.”

According to the report:

  • 30-year fixed-rate mortgages averaged 6.02% with an average 0.8 point as of Sept. 15, up from last week when it averaged 5.89%. A year ago at this time, the 30-year FRM averaged 2.86%.
  • 15-year fixed-rate mortgages averaged 5.21% with an average 0.9 point, up from last week when it averaged 5.16%. A year ago at this time, the 15-year FRM averaged 2.12%.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) averaged 4.93% with an average 0.2 point, up from last week when it averaged 4.64%. A year ago at this time, the 5-year ARM averaged 2.51%.

Zillow Home Loans Vice President Paul Thomas said that while interest rates continue to be volatile as markets adjust expectations for Fed rate hikes, mortgage rates ended the week basically unchanged at about 6% for a 30-year fixed rate loan. 

“Economic data and comments from (Federal Reserve) officials last week point to the Federal Reserve continuing to raise the Fed Funds rate until inflation is under control. The Consumer Price Index release (Tuesday) showed more persistent inflation than expected,” Thomas said. “As a result, investors are now fully pricing in a 75-basis-point hike in the Fed Funds rate at the next FOMC meeting, driving up interest rates” 

The Federal Open Market Committee is scheduled to meet next week, on Sept. 20-21.

George Ratiu, Realtor.com's manager of economic research, said that although the headline figure slowed from June’s high, core inflation remains stubbornly elevated, putting pressure on the Fed to maintain an aggressive stance on monetary tightening. 

“Markets are keeping a close eye on the central bank’s meeting next week, expecting another 75 basis point increase in the policy rate, if not a 100 basis point jump,” Ratiu said.

For real estate markets, he said, the rising costs of borrowing are further cooling demand for homes and deepening the affordability crisis. 

“The buyer of a median-priced home is looking at a monthly payment of $2,100 at today’s mortgage rate, a 66% jump from last year. With real median household incomes remaining relatively unchanged, many first-time homebuyers are finding the door to homeownership is closed for this season,” he said. “With borrowing costs expected to continue rising in the next few months, it is becoming increasingly clear that home prices need to decline to bring balance back to housing markets.”

Ratiu added that many sellers recognize the shift in market conditions and are responding by cutting their asking prices. 

The survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down 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.

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