Mortgage Rates Jump to 7.30% After Hot Inflation Report Ends Four-Week Decline

Mortgage rates jumped sharply to 7.30% on Tuesday after a hot inflation report ended four straight weeks of declines, pushing borrowing costs higher for homebuyers.

The average rate on the 30-year fixed mortgage rose 12 basis points from Monday according to Mortgage News Daily, marking the largest one-day increase in more than a month. The 10-year Treasury yield climbed from 4.88% to 4.98% on the same day.

The consumer price index showed broad upward pressure on prices beyond fuel costs, following a monthly employment report on Friday that pointed to a more heated economy than analysts anticipated. Matthew Graham, chief operating officer at Mortgage News Daily, said that the inflation data carried far more weight with the Federal Reserve than the jobs report.

“Given that the Fed explicitly said it was more focused on the inflation component of its job description at the moment, we were expecting today’s data to carry far more weight than last week’s jobs report,” Graham wrote on Tuesday, adding that the market reaction was immediate and logical.

The sudden increase follows a monthlong reprieve that had briefly revived mortgage demand. CNBC reported that mortgage applications rose 6.2% for the week ending prior to the jump, driven by a weekly average rate decrease to 7.21% on the 30-year fixed loan.

Applications to refinance a home loan rose 5% last week while remaining 57% lower than the same week one year ago. Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, pointed out that the Federal Housing Administration rate dropped back below 7% and sat more than 20 basis points lower than the conforming rate, assisting first-time buyers in the market.

“The declining trend in rates helped to spur stronger application activity, although the pace of purchase and refinance applications remain considerably lower than a year ago,” Kan told CNBC.

Applications for a mortgage to purchase a home rose 8% for the week but remained 18% lower year over year. Freddie Mac’s weekly survey had put the 30-year rate at 7.18% on November 5, with its next reading scheduled for Thursday, November 12, to cover the week including Tuesday’s jump.