Mortgage rates rise to highest levels in over 6 months

Mortgage rates headed upward for the third straight week, with both 30- and 15-year averages hitting their highest points since early April, according to Freddie Mac.

The 30-year fixed rate jumped five basis points to 3.14% for the weekly period ending Oct. 28, according to Freddie Mac’s Primary Mortgage Market Survey. One week earlier, the average came in at 3.09%, while the average rate from the same seven-day period in 2020 was 2.81%.

The 15-year fixed rate climbed to 2.37%, up from 2.33% the prior week. One year ago at the same time, the average stood at 2.32%

Various factors laid the groundwork for a sustained upswing in Treasuries and corresponding mortgage rates, according to Sam Khater, Freddie Mac’s chief economist. Averages have remained above 3% for four of the last five weeks after spending most of the summer well under that threshold.

“The yield on the 10-year Treasury note has been trending up due to the decline in new COVID cases, increasing consumer optimism, as well as broadening inflation and persistent shortages,” he said in a press statement.

The markets seem to have adjusted to the latest economic developments and expect current trends, including improved consumer confidence and inflation, to stick, at least in the near term, said Paul Thomas, Zillow’s vice president of capital markets.

“Bond investors have priced in higher inflation expectations recently, nearing 3% vs. the Federal Reserve long-term target of 2%,” he noted in a blog post.

Data released on Thursday brought mixed results, though. Jobless claims fell to their lowest since March 2020, but GDP slowed to 2% in the third quarter on an annualized basis, short of the 2.6% expected by analysts and a marked deceleration from 6.7% growth in the second quarter. September’s Personal Consumption Expenditures Price Index is also due to be released on Friday.

“Markets will be scrutinizing this data for any indications of persistent inflation pressures and overall economic activity. Rates could move considerably in either direction from here if this data diverges materially from expectations,” Thomas wrote.

Rising rates have not dampened the purchase market, though, with prices still elevated and loan applications increasing last week, The firm demand indicates that latent interest exists among consumers, Khater said.

Along with the increases in fixed mortgage, the 5-year Treasury-indexed adjustable rate also edged upward for the week, averaging 2.56%, a two-basis point rise from seven days earlier. In the same weekly period of 2020, the 5-year ARM was well above this week’s mark, averaging 2.88%.