US mortgage rates surge to highest in nearly three years
by@Reuters
Summary
This week, US mortgage rates surged by a quarter percentage point to an average of 7.28%, marking the largest weekly increase in nearly four years. The spike is attributed to rising yields on US 10-year Treasury notes, which reached their highest levels in almost 25 years due to stronger-than-expected economic growth in the first half of the year and ongoing inflation more than 1 percentage point above the Federal Reserve's target. As a result, there is widespread anticipation of additional interest rate hikes by the Fed to combat inflation, further straining affordability for potential homebuyers and dampening demand in the mortgage market.
Analysis
Freddie Mac: Freddie Mac is a government-sponsored enterprise that provides liquidity to the US mortgage market by purchasing loans from lenders and packaging them into securities. It publishes a widely followed weekly survey of average mortgage rates used as a benchmark by consumers and the industry. Its latest data release highlighted the sharp weekly rise in 30-year fixed mortgage rates tied to Treasury yield movements. Bob Broeksmit: Bob Broeksmit serves as President and CEO of the Mortgage Bankers Association, where he oversees advocacy and analysis of housing finance trends. He regularly issues statements interpreting industry data for policymakers and the public. In connection with the latest survey, he addressed how sustained higher rates are pressuring prospective homebuyers and refinancing activity. Mortgage Bankers Association: The Mortgage Bankers Association is a national trade association representing the real estate finance industry, including mortgage lenders, servicers, and related firms. It conducts regular surveys on mortgage applications and rates to track market conditions. Its recent report showed continued declines in application volumes amid the higher-rate environment, with its leadership commenting on impacts to affordability. Economic Drivers: Recent data revisions showing stronger US economic growth through the first half of the year have supported higher Treasury yields. Inflation and Policy: Elevated inflation readings above the Federal Reserve target have led market participants to anticipate further monetary policy tightening this year. Mortgage Market Linkage: Mortgage rates move closely in tandem with yields on US Treasury notes, particularly the 10-year benchmark.
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