According to a survey by Mortgage News Daily, the average 30-year mortgage rate surged to 8% on Wednesday. This increase was driven by the 30-year Treasury bond yield, which exceeded 5% and reached its highest level in 17 years.
The Mortgage Banker Association also released data on the same day, showing that the average contract interest rate for 30-year fixed-rate mortgages had been steadily rising for six weeks, reaching 7.70% by the week ending on Oct. 13. It had not been at such levels since November 2000.
In addition, five-year adjustable mortgage rates experienced a significant increase, reaching 6.52%, the second-highest level on record dating back to 2011. As a result, there was a significant decline in demand for mortgage loan applications, with a 6.9% decrease on a weekly basis, reaching the lowest point in 28 years.
The surge in Treasury yields has had a widespread impact on interest rates across the economy. Bonds with longer maturities have suffered a significant decline due to increasing inflation and interest rates. The iShares Treasury Bond ETF, as an example, has seen its value decrease by over 50% since 2020 and by more than 18% year to date.
Matthew Graham, the chief operating officer of Mortgage News Daily, noted that inflation and economic growth have been major factors contributing to the rapid increase in interest rates. He believes that the Federal Reserve will not signal an end to its policies of higher-for-longer rates until it sees a decrease in inflation and a cooling down of the economy. However, Graham believes that controlling inflation will be a challenge if the economy continues to display strong resilience.
