Mortgage rates hit their highest point since 2008

Three major mortgage-rate categories surged to highs not seen in over a decade, as the inflation battle continues dictating their direction and pace.

The 30-year fixed-rate average leaped another 23 basis points to 5.89% for the weekly period ending Sept. 8, according to Freddie Mac's Primary Mortgage Market Survey. One week earlier, the rate came in at 5.66% and has climbed over 75 basis points since mid August alone. Over the same seven-day period last year, the 30-year average came in more than 3% lower at 2.88%. 

"Mortgage rates rose again as markets continue to manage the prospect of more aggressive monetary policy to combat elevated inflation," said Freddie Mac's Chief Economist Sam Khater in a press release.

At the same time, the 15-year average also jumped 18 basis points to 5.16% from 4.98% week over week, crossing the 5% mark for the first time since 2009. A year ago, the 15-year rate stood at 2.19%. 

And rising in tandem, the 5-year Treasury-indexed hybrid adjustable-rate mortgage increased 13 basis points to 4.64% from 4.51% the previous week. In the same week of 2021, the 5-year ARM stood at 2.42%.

Both 30- and 15-year rates are now sitting at heights not seen since late 2008, while the 5-year hybrid ARM surpassed a 2009 high-water mark.

In a repeat of summertime trends, investors' reactions to perceived upcoming central bank actions in the inflation fight drove rates upward .

"Federal Reserve Chair Jerome Powell noted late in the prior week that the Fed is committed to containing inflation, which will likely result in some economic pain," said Paul Thomas, vice president of Zillow Home Loans, in a research statement.

"While data is pointing to easing pressure on prices in several sectors, the level of economic activity appears to give the Fed more runway to raise rates before triggering recession risk," he said.

Several other Fed officials also gave off strong hints of their intentions before the next Federal Open Market Committee meeting in late September, while economic data, including labor market reports, appear to support additional hikes in the federal funds rate.  

"Investors are adjusting expectations for short-term interest rates given these results, now expecting rates to increase more and stay at elevated levels for a longer time," Thomas said. 

While rising rates might dampen consumer sentiment, Khater also noted that wide ranges in what lenders are currently offering also exist, which could still bring potential borrowers to the table. 

"The dispersion of rates also has increased, meaning that borrowers can benefit from shopping around for a better rate," he said. 

"Our research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional rate quote and an average of about $3,000 if they get five quotes."