U.S. mortgage rates rose the most in more than two years last week, an industry lobby group said Wednesday, as lenders continue to adjust boost borrowing costs amid the Federal Reserve's aggressive push to tackle the fastest inflation in four decades.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $647,200 rose 23 basis point to 4.5% for the week ending on March 18, a move that marks the biggest weekly increase since the pandemic era moves of March 2020.
The MBA's seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single-family home, fell 1.5% while its refinancing index slumped 14.4% as homeowners backed away from accessing higher rates. New applications were down 8.1%, the MBA said.
The Commerce Department also published data showing new home sales fell 2% last month to a seasonally-adjusted annual rate of 772,000 units, with the average median price rising 10.7% from last year to $400,600.
“The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations of fewer MBS purchases from the Federal Reserve,” said the MBA’s chief economist Mike Fratantoni. “MBA’s new March forecast expects mortgage rates to continue to trend higher through the course of 2022.”
Homebuilding stocks were under pressure following the MBA and Commerce department data releases, with shares in Lennar Corp. LEN falling 2.4% and DR Horton DHI slumping 3.02%.
The mortgage rate moves follow last week's decision by the Federal Reserve to boost the Fed Funds rate by 25 basis points, to a range of 0.25% to 0.5%, while essentially pledging to make at least six, and possible seven, more rate hikes between now and the end of the year.
Speaking Monday to the National Association for Business Economics, Fed Chairman Jerome Powell revied bets on faster -- and deeper -- rate hikes over the coming months as inflationary pressures continue to accelerate amid surging commodity prices and supply chain disruptions linked to China's renewed Covid surge.
"The labor market is very strong, and inflation is much too high," Powell said. "If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so."
Bets on a 50 basis point hike at the Fed's May meeting jumped to 68.3% following Powell's speech, according to the CME Group's FedWatch tool, while benchmark 10-year note yields -- which have historically lead mortgage rates -- climbed to a 2019 high of 2.379%.
U.S. consumer confidence hit a ten-year low this month, according to the University of Michigan's closely-tracked data set, amid the energy price surge triggered by Russia's invasion of Ukraine on February 24.
U.S. retail sales growth slowed sharply last month, data from the Commerce Department indicated Wednesday, suggesting fading sentiment and surging inflation pressures are starting to take their toll on consumer spending.
Meanwhile, U.S. inflation accelerated to the fastest pace in four decades again last month with the recent surge in oil and gas prices linked to Russia's war on Ukraine likely to keep rates elevated well into the second half of the year.
