Mortgage Rates Hit 2023 High Mark

Freddie Mac reports in its latest Primary Mortgage Market Survey (PMMS) for the week ending July 6, 2023, that the 30-year fixed-rate mortgage (FRM) edged closer to the 7%-mark, hitting its highest point in 2023, averaging 6.81%, up 10-basis points week-over-week over last week’s reading of 6.71%. A year ago at this time, the 30-year FRM averaged 5.30%.

“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” said Sam Khater, Freddie Mac’s Chief Economist. “This upward trend is being driven by a resilient economy, persistent inflation, and a more hawkish tone from the Federal Reserve. These high rates, combined with low inventory continue to price many potential homebuyers out of the market.”

Also this week, the 15-year FRM averaged 6.24%, up from last week when it averaged 6.06%. A year ago at this time, the 15-year FRM averaged 4.45%.

“The Freddie Mac fixed rate for a 30-year mortgage ticked up by 0.1 percentage points to 6.81% this week, reaching the highest level since mid-November 2022, and mirroring the trend of 10-year Treasury yields,” added Realtor.com Economist Jiayi Xu. “The latest core Personal Consumption Expenditure (PCE) Price Index, a crucial indicator monitored by the Federal Reserve for monetary policy decisions, suggests that inflation remains sticky. Although the headline PCE decreased from 4.3% in April to 3.8% in May, the core PCE, which excludes volatile food and energy prices, only retreated slightly on a year-over-year basis, down from 4.7% in April to 4.6% in May. Meanwhile, the newly released Fed’s minutes reaffirms officials’ determinations to bring the inflation back to the target 2% range. While this may put near-term upward pressure on interest rates, including mortgage rates, we anticipate a gradual decrease that could bring rates close to 6% by the end of the year.”

A drop in rates could not come soon enough for those seeking a purchase or refi in this current market, as the Mortgage Bankers Association (MBA) reported overall mortgage application volume fell 4.4% week-over-week, and the MBA’s Refinance Index decreased 4% from the previous week, and was 30% lower than the same week one year ago.

Joel Kan, MBA’s VP and Deputy Chief Economist, noted, “Purchase applications decreased for the first time in a month, as homebuyers remained sensitive to rate changes. Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country. However, the average loan size for a purchase application declined to $423,500–its lowest level since January 2023. This was likely driven by reduced purchase activity in some high-price markets, and more activity in some of the lower price tiers as buyers searched for more affordable options.”