US Mortgage Rates Jump to 7.30% After a Hot Inflation Report
US mortgage rates rose sharply on Tuesday and ended a four-week slide. The weekly decline in rates that had lifted mortgage demand has ended.
Four weeks of falling rates
Before the jump, the Mortgage Bankers Association's weekly average for a 30-year fixed loan with a 20% down payment had eased to 7.21% from 7.30%. It marked a fourth weekly drop in a row, with the rate at its lowest since mid-September.
Demand responded. Mortgage applications rose 6.2% from the previous week. Applications to buy a home rose 8% but remained 18% lower than a year earlier. Refinance applications rose 5% and were still 57% below the same week a year ago.
The MBA's Joel Kan said the FHA rate had dropped back under 7%, a gap of over 20 basis points to the conforming rate. That helped first-time buyers. He said purchase applications for conventional, VA and FHA loans all gained, with the strongest growth in FHA and VA.
Tuesday's one-day jump
According to Mortgage News Daily, the 30-year fixed average went up 12 basis points overnight, to 7.30%. No single day had brought a bigger rise in over a month.
The trigger was the monthly inflation report. The consumer price index showed upward pressure on prices across the board, not only fuel. Friday's employment report had likewise come in stronger than analysts expected.
Matthew Graham, chief operating officer at Mortgage News Daily, said the Fed has put more weight lately on inflation than on full employment, so the inflation data was expected to matter more than the jobs report. He called the market's reaction logical and immediate.
Adjustable-rate loans
The share of applications for adjustable-rate mortgages dipped slightly as rates eased. Such loans start with a lower rate but put more risk on the borrower. Their appeal usually grows when rates climb and buyers hunt for a cheaper payment.
Source: CNBC