The Federal Reserve raised interest rates today – a much-anticipated move that comes as both U.S. and global economic fundamentals continue to strengthen. The Fed’s decision to raise interest rates by a quarter of a percentage point puts the federal funds rate at its highest level since 2008. The decision, while widely expected, sent the yield on the benchmark 10-year Treasury soaring. Following Treasurys, mortgage rates shrugged off last week’s drop and continued their upward march. The U.S. weekly average 30-year fixed mortgage rate rose 1 basis point to 4.45 percent in this week’s survey.
Tuesday’s Consumer Price Index report indicated inflation may be cooling down; headline consumer price inflation was 2.2 percent year-over-year in February. Following this news, the 10-year Treasury fell slightly. Mortgage rates followed Treasurys and ended a nine-week surge. The U.S. weekly average 30-year fixed mortgage rate fell 2 basis points to 4.44 percent in this week’s survey, its first decline this year.
The 10-year Treasury yield has been bouncing around in a narrow 15 basis point range for the last month. While the yield on the 10-year Treasury is currently below the high of 2.95 percent reached two weeks ago, mortgage rates are up for the ninth consecutive week. The U.S. weekly average 30-year fixed mortgage rate rose 3 basis points to 4.46 percent in this week’s survey, its highest level since January 2014.
Optimistic testimony on Capitol Hill from Federal Reserve Chairman Jerome Powell sent Treasury yields higher as Powell stated his outlook for the economy has strengthened since December. Following Treasurys, the 30-year fixed mortgage rate jumped 3 basis points to reach 4.43 percent in this week’s survey. The 30-year rate has been on a tear in 2018, climbing 48 basis points since the start of the year and increasing for 8 consecutive weeks.
Fixed mortgage rates increased for the seventh consecutive week, with the 30-year fixed mortgage rate reaching 4.40 percent in this week’s survey; the highest since April of 2014. Mortgage rates have followed U.S. Treasurys higher in anticipation of higher rates of inflation and further monetary tightening by the Federal Reserve. Following the close of our survey, the release of the FOMC minutes for February 21, 2018 sent the 10-year Treasury above 2.9 percent. If those increases stick, we will likely see mortgage rates continue to trend higher.
Wednesday’s Consumer Price Index report showed higher-than-expected inflation; headline consumer price inflation was 2.1 percent year-over-year in January two tenths of a percentage point higher than the consensus forecast. Inflation measures were broad-based, cementing expectations that the Federal Reserve will go forward with monetary tightening later this year. Following this news, the 10-year Treasury reached its highest level since January 2014, climbing above 2.90 percent. Mortgage rates have also surged. After jumping 10 basis points last week, the 30-year fixed-rate mortgage rose 6 basis points to 4.38 percent, its highest level since April 2014.
The U.S. weekly average 30-year fixed mortgage rate rocketed up 10 basis points to 4.32 percent this week. Following a turbulent Monday, financial markets settled down with the 10-year Treasury yield resuming its upward march. Mortgage rates have followed. The 30-year fixed mortgage rate is up 33 basis points since the start of the year. Will higher rates break housing market momentum? It’s too early to tell for sure, but initial readings indicate housing markets are sustaining their momentum so far. The MBA reported that purchase applications are up 8 percent from a year ago in their latest Weekly Mortgage Applications Survey.
The Federal Reserve did not hike rates this week, but the market views future hikes as a near certainty. The expectation of future Fed rate hikes and increased borrowing by the U.S. Treasury is putting upward pressure on interest rates. The 30-year fixed rate mortgage is up over a quarter of a percentage point (27 basis points) from the first week of the year. 30-year fixed mortgage rates have increased for four consecutive weeks and are now slightly above where they were last year at this time.
Rates keep climbing. The 10-year Treasury yield reached its highest point since 2014 reflecting expectations of broad-based economic growth. Mortgage rates, in turn, followed the surge in Treasury yields. The 30-year fixed rate mortgage jumped 11 basis points to 4.15 percent, its highest level since March of last year.
The release of the December existing home sales data confirms that 2017 was the best year for home sales in over a decade. Will 2018 home sales outpace 2017? Homebuyer affordability will be a challenge, with mortgage rates moving higher and robust house price gains across the country. The FHFA reported that house prices increased 6.5 percent from November 2016 to November 2017, with all regions showing positive 12-month changes.
The U.S. weekly average for the 30-year fixed mortgage rate rose above 4 percent for the first time since last summer to 4.04 percent in this week’s survey. This is the highest weekly average for the 30-year fixed rate mortgage since May of 2017. Inflation is firming, the Federal Reserve’s Beige Book indicates broad-based economic growth and labor markets are tightening. This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.