Mortgage Rates Jump to 14-Year High as Fed Delivers Jumbo Rate Hike

Federal Reserve Board Chairman Jerome Powell speaks during a news conference in Washington, on Sept. 21, 2022. (Saul Loeb/AFP via Getty Images)

U.S. mortgage rates spiked to record highs for the fifth straight week following the Federal Reserve’s decision to raise its key interest rate.

The average interest rate on a 30-year fixed-rate mortgage was 6.29 percent for the week ended Sept. 22, according to data from the mortgage lender Freddie Mac. This is the highest level since 2008, when the United States was going through a recession. Mortgage rates had last peaked at 5.81 percent on the week ended June 22, and declined to 4.99 percent on Aug. 3, before rallying to exceed the 6 percent level. A year ago on Sept. 22, 2021, the average interest rate on a 30-year fixed-rate mortgage was only 2.88 percent.

“The housing market continues to face headwinds as mortgage rates increase again this week, following the 10-year Treasury yield’s jump to its highest level since 2011,” Freddie Mac said in an update on Sept. 22.

“Impacted by higher rates, house prices are softening, and home sales have decreased. However, the number of homes for sale remains well below normal levels.”

The spike in mortgage rates came after the Federal Reserve raised interest rates for the fifth time this year, on Sept. 21. The key rate was hiked by 0.75 percent (or, 75 basis points), raising it to a target range between 3 percent and 3.25 percent.

During a press conference following the policy-setting meeting of the Federal Open Market Committee (FOMC), Fed Chair Jerome Powell said that inflation was running “too high” and that rates will move higher and remain elevated for “some time.”

Members of the FOMC expect the rate to peak at 4.6 percent by the end of 2023, and then decline to 2.9 percent by the end of 2025.

Housing Sentiment, Mortgage Burden

According to the recent report from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, builder sentiment in September fell for the ninth consecutive month.

Declining by three points, the index hit its lowest level since May 2014, at 46, with only a dip during the COVID-19 pandemic in 2020 being the sole exception.

A reading below 50 is considered negative. In January, the builder sentiment index had registered a value of 83. It began to decline after the Fed started raising interest rates and made mortgage borrowing expensive.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said NAHB Chairman Jerry Konter, according to the report.

According to data from the Mortgage Bankers Association, the national median mortgage payment was $1,839 in August, up 33 percent since the beginning of the year.