Mortgage Rates Spike To Levels Not Seen Since Bush's $700B Bailout: What It Means For Borrowers

For the fifth week in a row, mortgage rates increased sharply, reaching beyond 6% in response to the Federal Reserve's latest aggressive interest rate increase.

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.29% in the week ending Sept. 22, up from 6.02% the week before. This is the highest level seen since October 2008, when then-President George W. Bush signed the $700 billion Troubled Asset Relief Program (TARP) to purchase toxic assets from banks.

Rates have been rising since the beginning of the year, and this trend will continue through 2022. Interest rates respond to a wide range of economic circumstances, so they are dynamic and unpredictable — at least on a daily or weekly basis.

“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. “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.”

To control inflation, the Federal Reserve has raised interest rates several times this year, recently on Sept. 21, and has indicated that it will do so again.

Increased interest rates will probably result in increased mortgage rates and higher monthly mortgage payments for potential borrowers.

For an eager buyer who can’t wait for a downturn to purchase their dream home, mortgage lender NASB Financial Inc. NASB is offering a variety of banking products including checking, savings and certificate of deposit accounts. It is also offering mortgages and refinancing options, including self-employed mortgage options for the handyman or self-incorporated day trader.

How does The Fed's raising rates affect my mortgage? 10-Year Treasury Bonds.

The 10-Year Treasury Bond is a debt obligation with a 10-year initial maturity issued by the US government. A 10-year Treasury note pays the holder the face amount at maturity and a fixed interest rate once every six months.

Simply Said: Investors generally seek safe and consistent returns on their capital and are continuously looking for the best rate of return on their assets.

They often assess the potential returns on various fixed-income products, including money market funds, certificates of deposit (CDs), mortgage-backed securities, corporate bonds, and Treasury notes, as a consequence. For these investors, one of the safest and most secure bond investment options is Treasury notes, backed by the U.S. government.

The 10-year Treasury note, which has the most extended term to maturity of any Treasury note, is one of the most closely monitored and tracked forms of public debt issuance in the financial industry today. Given this, the 10-Year is a tool used as a benchmark against other interest rates, such as those for home mortgages, are measured.

Changes in the yields impact current mortgage rates on 10-year Treasury notes; the higher 10-year Treasury yields rise, the higher mortgage rates should be.

In contrast, mortgage-backed securities (based on the value of specific home loans) may provide more significant returns in exchange for more investor risk. In light of this, investors seek greater rates of return on mortgage-backed securities as Treasury yields rise to offset the most significant threat, resulting in higher interest rates for potential house buyers.

The current mortgage rates for homeowners are influenced by treasury bills, bonds, and notes. Furthermore, mortgage interest rates tend to rise in tandem with rising Treasury yields.

Steep mortgage rates will significantly elevate the monthly cost of homes, shutting out many buyers, decreasing overall demand, and affording leverage to the buyers who remain.

Last Call: To bring prices under control, the Fed is boosting interest rates. That does not preclude buyers from becoming homeowners or sellers from moving on to their next residence. It becomes even more crucial to be ready, so ensure you're selling for the right reasons and take precautionary steps like getting preapproved.