30-year fixed mortgage rates have jumped 160bp this year, reaching the highest since November 2018, with the latest Freddie Mac data showing an acceleration in mortgage rates which jumped a quarter point in just the past week, from 4.42% to 4.67%. This is an even bigger increase than we discussed in our recent Housing comment.
And while the benchmark 10y Treasury yield has also risen, the increase is “only” 94bp. In other words, there has also been a significant widening in mortgage spreads, by 66bp to 243bp. This could be explained by the Fed’s accelerated pivot from QE to QT, the latter of which we expect will be announced at the next FOMC meeting in May.
As discussed one week ago in “Housing Affordability Is About To Crash The Most On Record,” the move higher in rates means that an already record affordability shock will be even worse! As a reminder, we looked at the NAR affordability index and found that the 4.22% on average rate through mid-March, would lead to a record affordability decline of more than -25% yoy. Refreshing the data, Bank of America finds that the decline now looks closer to -30% yoy.