Freddie Mac Mortgage Rates Hit a 14-Year High

·2 min read
Money; Getty Images
Money; Getty Images

Mortgage rates reached a 14-year high this week, and experts blame economic uncertainty.

The 30-year fixed-rate mortgage is now averaging 5.89% for the week ending September 8, according to Freddie Mac’s benchmark survey. That’s the highest it’s been since 2008, and more than 3 percentage points higher than September 2021.

Other loan categories are also on the rise: The average rate on a 15-year fixed-rate mortgage moved up to 5.16% this week, while the rate on a 5/1 adjustable-rate mortgage rose to 4.64%.

The housing market, like most sectors of the U.S. economy, is reacting to worsening inflation and “the prospect of more aggressive monetary policy,” outlined by the Federal Reserve, said Sam Khater, chief economist at Freddie Mac, in a press release.

In a speech last week, Fed chairman Jerome Powell said the agency is focusing on bringing inflation down to 2%, and will likely have to raise interest rates to meet that goal.

As a result, mortgage rates will probably also remain elevated for the next several weeks.

How interest rates affect mortgage rates

Interest rates set by the Federal Reserve are tied to U.S. treasury bonds, which impact the mortgage market. (Mortgage rates typically run 1.8% higher than the yield on the 10-year treasury.) And since the Fed has indicated that it will continue raising the federal funds rate—and holding it near 4% until there are clear signs that consumer prices are dropping—mortgage rates are also on the rise.

Experts cite today’s tight labor market—in which there are more job openings than applicants looking to fill them—and the fact that inflationary pressure is increasing wages across industries, as indicators that the Fed will make good on its promise.

“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 a recession risk,” said Paul Thomas, vice president of Zillow Home Loans, in a statement.

Wednesday’s release of the Federal Reserve’s Beige Book, a review of economic conditions throughout the U.S., noted little change in overall economic activity over the past month.

Experts anticipate the central bank to announce another 0.75 percentage point interest rate hike at the Federal Open Market Committee meeting later this month. This will likely drive mortgage rates even higher.

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