Mortgage rates make large leap on strong economic news

Mortgage rates had their largest week-to-week uptick since October 2018 as bond market investors reacted to positive news about the economy, according to Freddie Mac.

"Despite the rise in mortgage rates, economic data improved this week — particularly housing activity, which gained momentum with a noticeable rise in purchase demand and new construction," Sam Khater, Freddie Mac's chief economist, said in a press release.

"Homebuyers flocked to lenders with purchase applications, which were up 15% from a year ago and residential construction permits increased 12% from a year ago to 1.4 million, the highest level in 12 years. While there was initially a slow response to the overall lower mortgage rate environment this year, it is clear that the housing market is finally improving due to the strong labor market and low mortgage rates."

But while mortgage rates were primed for additional modest gains following the Federal Reserve's policy statement on Sept. 18, "what sent bond yields upward was the Fed surprising many investors by not pointing to future rate cuts," Matthew Speakman, an economist for Zillow, said when that company released its own rate tracker. "Mortgage rates rose late last week following a positive surprise from retail sales data, capping a seven-day increase that marked the largest rate run-up since 2016. The attacks on oil facilities in Saudi Arabia brought rates back down slightly on Monday, after investors sought out inflation-protected bonds, fearing that rising oil prices would ignite inflation."

"Still, mortgage rates are now noticeably higher than lows reached just two weeks ago, and it appears, at least for now, that the period of historically low mortgage rates may well be a thing of the past," Speakman said.

The 30-year fixed-rate mortgage averaged 3.73% for the week ending Sept. 19, up from last week when it averaged 3.56%, according to Freddie Mac. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.65%.

The 15-year fixed-rate mortgage averaged 3.21%, up from last week when it averaged 3.09%. A year ago at this time, the 15-year fixed-rate mortgage averaged 4.11%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.49% with an average 0.4 point, up from last week when it averaged 3.36%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.92%.