Mortgage Interest Rates

Mortgage rates increased in August as Treasury yields remained elevated amid persistent inflation concerns. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.67% in August, up 13 basis points (bps) over July.

Since the conflict in the Middle East began, the 30-year mortgage rate has jumped by more than 60 bps. Mortgage rates are now roughly on par with their levels a year ago.

The 10-year Treasury yield, a key benchmark for long-term borrowing, rose 10 bps to an average of 4.68% in August. Yields rose in the later part of the month amid a broader selloff in global government bonds.

Trends by Loan Type

Applications for adjustable-rate mortgages (ARMs) and fixed-rate mortgages (FRMs) decreased in August 0.6% and 3.4% month-over-month, respectively. Compared with a year earlier, ARM application volume fell 18.2%, while FRM applications declined 8.2%.

Interest Rate Outlook

Long-term government bond yields across several major economics climbed to multi-year highs in August, with the 30-year US Treasury yield reaching its highest level since 2007 and long-term yields in Japan and parts of Europe reaching levels not seen in decades.

The global selloff reflected growing investor concerns about persistent inflation, rising government debt and heavy sovereign borrowing. Higher oil prices from the ongoing Iran conflict also added to inflation concerns.

Comments from Federal Reserve Chair Kevin Warsh following the most recent FOMC meeting reinforced market expectations that monetary policy could tighten further later in the year.

Faced with stubbornly high home prices and elevated interest rates, many would-be buyers continue to stay on the sidelines until housing affordability conditions improve.