The average 30-year fixed mortgage rate jumped to 7.45% on Thursday as Treasury yields surged. The S&P 500 held nearly flat through the move, while the VIX jumped and economists say an 8% mortgage rate is possible.
Bond yields surged again on Thursday, pushing the average 30-year fixed mortgage rate to 7.45%, according to Mortgage News Daily.
Mortgage rates jump as Treasury yields spike
The 30-year fixed rate rose 19 basis points in a single day, from 7.26% to 7.45%, after Mortgage News Daily re-ran its survey when the 10-year Treasury yield moved even higher in the afternoon. Freddie Mac's separate weekly average had only just crossed 7% that morning.
Matthew Graham, chief operating officer at Mortgage News Daily, said the afternoon bond selloff had no clear trigger. According to CNBC, Graham said: "Sellers decided to sell… a lot". Graham noted that 7% was first broken on September 10th, following inflation reports that raised the risk of the Fed rate hike seen last week.
S&P 500 and Dow diverge as VIX climbs
Broad equities showed a mixed reaction to the rate move: the S&P 500 slipped 0.02% to 7,704.13 and the Dow Jones Industrial Average fell 0.31% to 51,349.98, while the Nasdaq edged up 0.01%. The CBOE Volatility Index rose 3.23% to 15.67, pointing to rising hedging demand even as the index itself barely budged.
The 10-year Treasury yield stood at 5.205%, the benchmark mortgage rates loosely track. Rates began climbing at the start of the war with Iran, then moved higher again after the Federal Reserve raised its benchmark interest rate earlier this month.
Could rates reach 8%?
Economists say a move to 8% on the 30-year fixed is possible but not probable. For that to happen, the spread between the 10-year Treasury and the 30-year mortgage rate would need to widen further from current levels.
The housing market is already struggling with high home prices, weak consumer confidence and a lean supply of affordable homes.
Sources: CNBC, MarketWatch (snippet-based)
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