US Mortgage Rates Jump to Highest Level Since November 2022

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Facts

  • The average interest rate on the most popular home loan in the US rose last week to its highest level since Nov. 2022, data from the Mortgage Bankers Association showed on Wednesday.1
  • The average contract rate on a 30-year fixed-rate mortgage rose 23 basis points [i.e. 0.23%] up to 6.62%, in the week ending Feb. 17.1
  • In Feb. 2022, 30-year fixed-rate mortgages could be found as low as 3.92%, though they proceeded to climb for most of the year until November, following perceptions that inflation may have peaked. They are now predicted to move to around 6-7%.2
  • Rising inflation and the US Federal Reserve’s 2022 rate hikes — which it said would curb inflation — contributed to the increase in mortgage rates which ultimately hit a 20-year high in late 2022.3
  • While mortgage rates are not set by the Federal Reserve, interest rate increases — as well as the perception that the Federal Reserve will increase interest rates — do impact mortgage rates. It has been speculated that the Federal Reserve may continue to consider interest rate hikes in light of recent employment statistics and other factors.2
  • As mortgage rates have increased, fewer people have been buying houses. Last week, the MBA's Purchase Composite Index, a measure of all mortgage loan applications for the purchase of single-family homes, dropped 18.1% from the week before its lowest level since 1995.1

Sources: 1Reuters, 2CNN and 3CNET.

Narratives

  • Pro-establishment narrative, as provided by FT. The US Federal Reserve must continue to increase interest rates, no matter how painful it may be for workers now, how much it may temporarily increase unemployment, or how badly it may exacerbate a recession. Failure to stay the course and maintain high-interest rates now will only make it more difficult to keep inflation under control — it may well result in the Federal Reserve having to push interest rates even higher in the future than would otherwise have been necessary.
  • Establishment-critical narrative, as provided by Guardian. Continuing interest rate hikes by the Federal Reserve will crush millions of working families and increase unemployment, but it won’t tackle the real causes of inflation. The belief that inflation has been on the rise because workers are in a better bargaining position — known as the “wage-price spiral” — is a myth. Workers’ wages have increased but their real wages have dropped because they’re not keeping up with inflation. Inflation is currently caused by global supply-chain disruptions and profiteering by corporations that are raising their prices without restriction.