Mortgage rates climbed last week to the highest level since August as prospective home buyers don’t get the relief they may have expected after the Federal Reserve enacted the first interest rate cut in more than four years.
A house for sale in the Forest Hills neighborhood of New York.
The average 30-year fixed mortgage rate rose to its highest level since the week ending Aug. 9 at 6.52%, according to a Mortgage Bankers Association survey, which tracks mortgage application data nationwide.
It’s the sharpest two-week jump for 30-year mortgage rates since Feb. 2023, according to Bloomberg, with mortgage rates up about 0.4 percentage points from the last week of September’s 6.14%.
It was the third consecutive week of increasing mortgage rates, a first since April.
Mortgage applications fell 17% last week compared to the week prior.
The “recent uptick in rates has put a damper on applications,” Mortgage Bankers Association economist Joel Kan explained in a statement.
Mortgage rate movements correlate strongly with changes in yields for U.S. Treasury notes, which determine the rate at which investors are willing to hold government bonds, which are essentially loans to fund the federal government. Specifically, the 10-year Treasury is seen as the biggest influence on mortgage rates, and yields for the 10-year have shot up in recent weeks, moving from about 3.6% just before the Fed’s rate cut Sept. 18 to 4.01% Wednesday. That seemingly defies conventional wisdom, as bond yields typically decrease as the Fed-determined federal funds rate does, but it’s not necessarily flashing a bad signal for the economy broadly, as it’s rather a signal the market is less enticed by ultra-safe government bonds as economists and traders alike signal the U.S. has most likely avoided a recession this economic cycle.
Yields for the 10-year Treasury is down a full percentage point over the last year, and mortgage rates are down massively as well. The MBA’s 30-year mortgage rate peaked at a 23-year high of 7.9% last October, and sat above 7% as recently as July, indicating there has been some relief for borrowers. The federal funds rate, which only officially determines the lending fees between banks but affects borrowing rates across the country, sits at 4.75% to 5.25% after the cut, which is still higher than it stood from 2008 to 2022. Mortgage rates hit an all time low of below 3% in 2021 before quickly shooting up, though home prices remain close to all time highs amid U.S. housing market supply shortages.