Finance

US Mortgage Rates Breach 6%

Published SEP 15 2022

Story

Image credit: AP [via Al Jazeera]

The Facts

On Thursday, mortgage-finance giant Freddie Mac reported that the US's 30-year fixed mortgage rate increased to 6.02% — up from 5.89% last week and 2.86% a year ago — breaking the 6% threshold for the first time since the 2008 market housing crash.
Al Jazeera
This comes as the US is facing its worst inflation in 40 years, and follows a key inflation reading on Tuesday that revealed that, although inflation has slowed for a second month due to retreating gas prices, the cost of other essentials has increased.
The Washington Post
To tame inflation, the Federal Reserve (Fed) has so far raised its benchmark interest rate four times this year, with economists forecasting a further three-quarter point increase in tandem with a Fed meeting next week.
The Washington Post
Although mortgage rates aren't directly tied to the federal funds rate, they often increase as the Fed hikes rates.
wsj
Meanwhile, although home prices remain elevated from a year ago, the pace of price growth has decelerated and existing-home sales declined for six straight months through July.
wsj
According to the Mortgage Bankers Association's seasonally adjusted index, this trend is continuing into September, with mortgage applications this week 29% lower than the same week one year ago.
CNBC

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The Spin

Establishment-critical narrative

Although the Fed doesn't set mortgage rates, its actions influence them. The central bank waited too long to cool inflation, and now the housing market is paying the price: mortgage rates are rising faster than the news can keep up with - increasing pressure on an economy already tormented by relentless inflation.

Bloomberg.com

Pro-establishment narrative

The process of bringing down inflation is unpopular and pain-inducing, but necessary. There is broad consensus among Fed bankers and economists that it's time to increase quantitative tightening to rein in inflation. The Fed is acting well within its mandate to try and tamp down economic pressures.