Freddie Mac reports in its latest Primary Mortgage Market Survey (PMMS) [1] for the week ending July 6, 2023, that the 30-year fixed-rate mortgage (FRM) edged closer to the 7%-mark, hitting its highest point in 2023, averaging 6.81%, up 10-basis points week-over-week over last week’s reading of 6.71% [2]. A year ago at this time, the 30-year FRM averaged 5.30%.
“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” said Sam Khater, Freddie Mac’s Chief Economist [3]. “This upward trend is being driven by a resilient economy, persistent inflation, and a more hawkish tone from the Federal Reserve. These high rates, combined with low inventory continue to price many potential homebuyers out of the market.”
Also this week, the 15-year FRM averaged 6.24%, up from last week when it averaged 6.06%. A year ago at this time, the 15-year FRM averaged 4.45%.
“The Freddie Mac fixed rate for a 30-year mortgage ticked up by 0.1 percentage points to 6.81% this week, reaching the highest level since mid-November 2022, and mirroring the trend of 10-year Treasury yields,” added Realtor.com Economist Jiayi Xu [4]. “The latest core Personal Consumption Expenditure (PCE) Price Index [5], a crucial indicator monitored by the Federal Reserve for monetary policy decisions, suggests that inflation remains sticky. Although the headline PCE decreased from 4.3% in April to 3.8% in May, the core PCE, which excludes volatile food and energy prices, only retreated slightly on a year-over-year basis, down from 4.7% in April to 4.6% in May. Meanwhile, the newly released Fed’s minutes reaffirms officials’ determinations to bring the inflation back to the target 2% range. While this may put near-term upward pressure on interest rates, including mortgage rates, we anticipate a gradual decrease that could bring rates close to 6% by the end of the year.”
A drop in rates could not come soon enough for those seeking a purchase or refi in this current market, as the Mortgage Bankers Association (MBA) reported overall mortgage application volume fell 4.4% week-over-week [6], and the MBA’s Refinance Index decreased 4% from the previous week, and was 30% lower than the same week one year ago.
Joel Kan, MBA’s VP and Deputy Chief Economist [7], noted, “Purchase applications decreased for the first time in a month, as homebuyers remained sensitive to rate changes. Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country. However, the average loan size for a purchase application declined to $423,500–its lowest level since January 2023. This was likely driven by reduced purchase activity in some high-price markets, and more activity in some of the lower price tiers as buyers searched for more affordable options.”