Seven weeks of rate climbs end at near a three-year high, while tumbling bond yields hint at near-term relief for US mortgage brokers
American mortgage rates paused their seven-week ascent this week, holding at a near three-year high while a drop in Treasury yields suggested the worst of the climb may be behind the market.
The 30-year fixed-rate mortgage held at 7.40% for the week ending October 15, according to Freddie Mac’s Primary Mortgage Market Survey. The 15-year fixed-rate mortgage, a benchmark for homeowners eyeing a refinance, eased to 6.71% from 6.73%.
Both products remain well above their year-ago readings of 6.27% and 5.52%.
What the bond market is already signaling
The flat reading is less surprising given recent bond market activity. The benchmark 10-year Treasury yield – lenders’ primary reference for pricing home loans – tumbled almost 13 basis points on October 15 to 5.066%, from a monthly high of 5.31%.
Because the Freddie Mac survey captures data ahead of its weekly release date, Thursday’s bond market move has yet to feed through to published rates. If yields hold lower, some near-term rate relief is plausible.
Rates have climbed since late February, when the US-Iran conflict pushed oil prices higher and lifted inflation expectations, pulling Treasury yields with them.
Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA) in Washington, DC, recently told Mortgage Professional America that the spike had fundamentally reset buyer psychology.
“Seven percent is not a good rate, but they’re not looking for a 3% rate anymore,” Fratantoni said. “The Middle East conflict is absolutely the variable that really threw our forecast off.”
Sellers adjust as demand stalls
The sustained pressure is beginning to register in seller behavior. According to new Redfin data showing the median US asking price declined for the first time since March, prices fell 0.3% year over year in the four weeks ending October 11.
The share of active listings with a price cut has reached a record 22%. The median monthly mortgage payment stands at $2,777, also a record.
Pending home sales remain near 2021 lows, with annual declines posted across all 50 of the most populous US metro areas.
Desmond P. Smith, executive vice president and chief growth officer at United Wholesale Mortgage in Pontiac, Michigan, told MPA the environment demands more from originators.
“Rates are what they are,” he said. “So you either get to create your own reality, which probably means you’ve got to work harder... but if you keep the activity, you will be fine.”
The MBA projects 30-year rates to remain above 7% through all of 2027, with two additional Federal Reserve rate hikes expected by the first quarter of next year.
Fannie Mae, meanwhile, has dramatically revised upward its 2027 mortgage rate expectations, now projecting the 30-year at 7.5% through year end.
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