Mortgage rates keep rising, influenced by DC developments

The 30-year fixed rate mortgage moved 5 basis points higher from last week, but still remains under 7%, at least according to Freddie Mac.

"Mortgage rates inched up this week but continue to remain lower than one year ago," said Sam Khater, Freddie Mac's chief economist, in a press release. "With more inventory for buyers to choose from than the last few years, purchase application activity continues to hold up."

The average of 6.86% as of May 22, is up from 6.81% seven days earlier, while a year ago at this time, it was higher at 6.94%.

Meanwhile, the 15-year FRM averaged 6.01%, up 9 basis points from last week when it was 5.92%. For the same week in 2024, the average was 6.24%.

What is influencing mortgage rates this week

On a more immediate basis, political developments in Washington around the tax bill and comments from Pres. Trump on ending the government-sponsored enterprise conservatorships have likely resulted in higher mortgage rates, although the 10-year Treasury yield is flat on the day.

Some of the more-timely trackers have the 30-year FRM climbing above 7.1% as of 11 a.m. The 10-year yield was at 4.59%, down 1 basis point from the previous close; it had been climbing since May 16, when it closed at 4.44%, which was before Moody's announcement later that day.

"Treasury yields first increased due to Moody's downgrading the U.S. credit rating, which factored in the increased risk from the government's elevated budget deficit and high interest payments," said Kara Ng, Zillow Home Loans senior economist in a Wednesday evening statement. "Throughout the week, yields continued to rise as government budget negotiations further amplified concerns about the deficit."

Zillow was at 7.13%, up from 7.1% at the end of Wednesday and from the average of 7.01% one week earlier.

Lender Price data posted on the National Mortgage News website was at 7.115%. This compared with 7.034% on Wednesday and 7.015% one week ago.

Where mortgage rates are likely to go

Unlike Fannie Mae, which is expecting rates to decline through the next six quarters, Redfin is predicting the weekly average to remain around 6.8% for the rest of the year.

"One of the only things that could drive rates down is if the administration eliminates all of the new tariffs and makes it clear they're not coming back," said Chen Zhao, Redfin's head of economics research, in a press release.

"Rates could also drop if the country dips into a severe recession," he said. "But that is less likely now that the trade war has been scaled back, and it would be counterproductive for house hunters because even though mortgage rates would be lower, many buyers would have less money to buy a home."

Also bearish on mortgage rate movements is TransUnion.

"Due to the anticipated impacts of announced tariffs on near-term inflation, mortgage rates are expected to remain elevated above 6% in the next quarter," said Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion, in a press release. "Without a significant decrease in mortgage rates, origination activity for both purchases and refinances is likely to remain subdued."

What happened with application activity?

Last week's Mortgage Bankers Association Weekly Application Survey was down over 5%.

"Mortgage applications declined last week as ongoing uncertainty in the financial markets raised mortgage rates to levels not seen since February," Bob Broeksmit, the organization's president and CEO, said in a Thursday statement.

"Refinance and home purchase applications both fell as a result, but purchase demand overall is holding steady, up 13% one year ago," he continued. "MBA expects mortgage rates to remain volatile but to stay within the same narrow range of 6.6% and 7% in the coming months."