Today’s Mortgage Rates & Trends – October 12, 2022: Rates back up

Mortgage rates rose higher across most loan types Tuesday, including a bump in 30-year rates that returned the flagship average to its 20-year high, registered just two weeks ago.

Today’s National Mortgage Rate Averages

Rates on 30-year mortgages climbed a tenth of a percentage point Tuesday, raising the average to 7.42%. That’s the same notable rate registered on September 27, which is a high-water mark of the past 20 years. Across the last two weeks, the wildly swinging average had dipped to 6.81%.

The 15-year average meanwhile surged more than a third of a percentage point Tuesday, rising to 6.89%. That sets a new 14-year peak, outdoing the previous mark of 6.78% registered last week.

The Jumbo 30-year average corrected Tuesday for the anomalous spike it saw Monday, when it soared 76 basis points. All 76 points were subtracted Tuesday, taking the Jumbo 30-year average back to 6.02%, which is still its most expensive range since 2010.

Refinancing rates held mostly steady Tuesday for 30-year loans, while the 15-year refi average gained 21 basis points. Like Jumbo 30-year new purchase rates, the Jumbo 30-year refi average gave up almost all of its dramatic gain from Monday. The cost to refinance with a fixed-rate loan is currently zero to 51 points higher than new purchase loans.

After a major rate dip last summer, mortgage rates skyrocketed in the first half of 2022, with the 30-year average hitting a mid-June peak almost 3.5 percentage points above its August 2021 floor of 2.89%. But September’s surge dramatically outdid the summer high, with the 30-year average spiking 1.27 percentage points over just 16 days to reach 1.04 percentage points above June’s peak.

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Lowest Mortgage Rates by State

The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage loan term, and size, in addition to individual lenders’ varying risk management strategies.

What Causes Mortgage Rates to Rise or Fall?

Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as the level and direction of the bond market, including 10-year Treasury yields; the Federal Reserve’s current monetary policy, especially as it relates to funding government-backed mortgages; and competition between lenders and across loan types. Because fluctuations can be caused by any number of these at once, it’s generally difficult to attribute the change to any one factor.

Macroeconomic factors have kept the mortgage market relatively low for much of this year. In particular, the Federal Reserve has been buying billions of dollars of bonds in response to the pandemic’s economic pressures, and it continues to do so. This bond-buying policy (and not the more publicized federal funds rate) is a major influencer on mortgage rates.

Since June, the Fed has been reducing its balance sheet. Identical sizable reductions occurred monthly through the summer and are being accelerated in September. This is on top of its plan to reduce new bond purchases by an increment every month, the so-called taper, which began in November.

The Fed’s rate and policy committee, called the Federal Open Market Committee (FOMC), meets every six to eight weeks. Their next scheduled meeting takes place November 1-2.

Methodology

The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country’s top lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a FICO credit score in the 700–760 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.

For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.