Even before the Federal Open Market Committee's short-term rate hike yesterday, the 10-year Treasury yield, a benchmark for setting mortgage rates, had been climbing to peaks not seen in years.
Still those yields started easing on Thursday morning after an initial negative reaction to the 25 basis point fed funds rate hike and
But this week's Freddie Mac Primary Mortgage Market Survey, which reported a huge 19 basis point gain for the 30-year fixed rate loan, did not fully account for what the FOMC did due to the timing of the data.
Why mortgage rates increased this week
"The 30-year fixed-rate mortgage continues to fluctuate as markets assess economic data," said Sam Khater, Freddie Mac's chief economist, in a press release.
The average was at 6.95% as of Sept. 17, compared with
The last time the 30-year FRM was as high
Meanwhile, Freddie Mac also reported a significant increase in the 15-year FRM, to 6.26%, versus 6.09% on Sept. 10 and 5.41% a year ago.
"Mortgage rates are likely to remain elevated in the near term after the Fed raised rates for the first time since 2023 and renewed its fight against inflation," Sam Williamson, senior economist at First American, said in a commentary on
"Over time, firmer Fed action could help steady the bond market and open the door to lower mortgage rates, but only if investors become more confident that inflation is coming under control," he continued. "That could improve buying power and draw some of today's pent-up demand off the sidelines."
While higher income and slower house price appreciation would help consumers with buying power, elevated mortgage rates will limit how much this potential increase in demand translates into sales, Williamson said.
10-year Treasury yield movements in recent days
While the yield broke above 5% for three consecutive days, Wednesday was the first day it closed above this mark, albeit by less than 1 basis point.
In what could be good news for mortgage rates going forward, early results Thursday morning were positive, with yields almost 6 basis points lower, at 4.95%.
However, the data from two product and pricing engines, Lender Price and Optimal Blue put the current rate for the 30-year fixed over 7% As of 11 a.m., Thursday morning, Lender Price data posted on the National Mortgage News website had the 30-year FRM at 7.47%.
The latest public data from Optimal Blue had the conforming 30-year FRM at 7.047% as of Wednesday, up 3 basis points from the prior day.
But the jumbo also broke 7%, reaching 7.038%, a gain of over 5 basis points. The two products have been close in price since mid-June.
More FOMC rate hikes and the impact on mortgages
Keefe, Bruyette & Woods is now expecting two more fed funds rate hikes through 2027. It increased its outlook for the 10-year Treasury yield to end 2026 at 4.75%, 35 basis points above its previous projection of 4.4%.
On Feb. 27, the yield closed at 3.96%, prior to the U.S. and Israel starting a conflict with Iran. The onset of war led to higher energy prices and inflationary pressures.
The new forecast implies that the 30-year FRM "
In particular, he noted KBW had outperform ratings for Rithm and Rocket.
Financial advisory firm deVere Group is predicting another FOMC rate hike in December.
CME FedWatch on Thursday morning is nearly equally split on the likelihood of a 25 basis point rise at the FOMC's October meeting. But for December, only 13% are looking for no change. Just under half expect a 25 basis point increase from current levels, while over 37% think the Fed could bring the rate target up 50 basis points.
"Mortgages, corporate refinancing and variable rate business loans all move on the back of this decision, and a second hike in December means that repricing continues rather than settles," Nigel Green, deVere CEO, said in a press release.
"Businesses and households planning around today's rate as the peak are building their plans on potentially the wrong assumption."
