The average 30-year fixed rate mortgage (FRM) rate increased slightly to 5.81% in the week ending June 24, 2022. The average 15-year FRM rate also rose this week, to 4.92%. This continues an upward run on FRM rates which began in January 2022.
FRM rates have jumped from historic lows reached during the 2020 recession/pandemic. FRM rates will continue to rise as the Federal Reserve (the Fed) stays the course in increasing its benchmark interest rate and selling off its mortgage backed bond (MBB) holdings in an effort to put the breaks on inflation and cool off asset prices.
Fundamentally, the setting of FRM rates is tied to the bond market, moving in tandem with the 10-year Treasury Note (T-Note) rate. Historically, the spread between the 10-yr T-Note rate for setting the FRM rate is a premium of 1.5%.
The 10-yr T-Note rate is 3.14% as of June 24, 2022. However, the spread between the 10-year T-Note and 30-year FRM rate has widened to 2.67%, a significantly higher premium than the historical rate spread of 1.5%. Today’s high spread indicates lenders are padding their risk premiums in anticipation of more rate increases — and future defaults. Combined, current mortgage rate pressures reduce the amount of money a homebuyer can borrow without huge pay raises.
The average monthly rate on ARMs continued to jump in May 2022, averaging 4.06%. Still, interest rates on both 15- and 30-year FRM rates are currently higher than the average ARM rate, making these riskier ARM products more appealing to homebuyers seeking to increase their borrowing capacity. This inversion is pushing ARM use higher in 2022.
Looking ahead, when today’s ARMs reset from their artificially low teaser rate, mortgage interest rates will be even higher than they are presently, making refinancing into an FRM rate impractical. Today’s ARM users will need to count on a major income boost to make the new, higher mortgage payments — or else plan to sell when the teaser period is over. Thus, today’s increased ARM use is tipping the housing market towards instability.
To further disrupt the now-ending pandemic home sales market, the government has fully lifted their support which had stabilized personal income in the face of 2020’s historic job losses. Yet, California is still missing 232,000 jobs from the pre-recession peak as of May 2022. While lost income normally results in reduced sales volume and prices, the opposite occurred in 2020-2021. What prevented recessionary conditions from enduring in the housing market were the concurrence of historically low home inventory for sale, an unparalleled mortgage interest rate reduction, massive cash disbursements to consumers, and foreclosure and eviction moratoriums. As these events collectively reverse course in 2022, expect to see downward pressure on home sales — and soon enough, prices — through the next three-to-five years.
Updated June 24, 2022. Original copy released March 2012.
Click the link to go directly to a chart, or browse the charts by scrolling below.
1. 30-year fixed rate mortgage (FRM) rate, weekly — Chart update 06/24/22
2. 30-year FRM rate, monthly — Chart update 05/27/22
3. 15-year FRM rate — Chart update 06/24/22
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 05/27/22
5. 10-year Treasury note rate — Chart update 06/24/22
6. Combined FRM and 10-year Treasury note rates — Chart update 04/29/22
7. 91-day Treasury bill rate — Chart update 06/10/22
8. 3-month Treasury bill — Chart update 06/03/22
9. 6-month Treasury bill — Chart update 06/03/22
10. Treasury Securities average yield — Chart update 06/10/22
11. 12-month Treasury average — Chart update 06/03/22
12. London Inter-Bank Offered rate (LIBOR) — Chart update 06/17/22
13. Secured Overnight Financing Rate (SOFR) — Chart update 06/17/22
14. Applicable federal rates — Chart update 06/17/22
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| Chart update 06/24/22 | ||
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Current |
Month ago
05/27/22
4.20%
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Year ago
06/25/21
2.53%
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The average 30-year FRM rate in California is provided by Bankrate.com.
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| Chart update 05/27/22 | ||
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May 2022
Average
5.23%
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Apr 2022
Average
4.98%
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May 2021
Average
2.96%
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| Chart update 06/24/22 | ||
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Current
06/24/22
4.92%
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Month ago
05/27/22
4.31%
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Year ago
06/25/21
2.34%
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The average 15-year FRM rate in California is provided by Bankrate.com.
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| Chart update 05/27/22 | ||
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May 2022
4.06%
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Apr 2022
3.70%
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May 2021
2.62%
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The 5/1 average adjustable rate mortgage (ARM) rate shows the average rate for the first five years after origination. After the initial five-year period, the ARM rate is adjusted annually based on an index figure, such as a certain Treasury Bill rate (which reflects Federal Reserve rate movements) or the London Inter-Bank Offered Rate (LIBOR). Beginning January 2016, the average ARM rate in California is provided by Bankrate.com. Prior to January 2016, the average ARM rate is provided by Freddie Mac’s survey of the Western Region of the U.S.
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| Chart update 06/24/22 |
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Current
06/24/22
3.14%
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Month ago
05/27/22
2.74%
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Year ago
6/25/21
1.51%
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This rate is a leading indicator of the direction of future Freddie Mac rates. The 10-year rate historically runs closer to 4% during a stable money market. The rate is influenced by worldwide demand for the dollar and anticipated future domestic inflation.
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| Chart update 05/27/22 |
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Avg 15-Year
Apr 2021
4.44%
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Avg 30-Year
Apr 2021
5.23%
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Avg 10-Year T-Note
Apr 2021
2.92%
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The average 15- and 30-year conventional commitment rates are the rates at which a lender commits to lend mortgage money in the United States-West/California for the duration of the life of each respective mortgage as reported by Freddie Mac. The green line reflects the 10-Year Treasury Note Average, a leading indicator of the direction of future Freddie Mac rates. It is comprised of the level of worldwide demand for the dollar and anticipated future domestic inflation.
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| Chart update 06/10/22 |
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Current
06/09/22
1.25%
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Month Ago
05/12/22
0.92%
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Year Ago
06/10/21
0.03%
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This rate determines the minimum interest rate the seller must use in a delayed §1031 transaction and report when not receiving interest on §1031 monies held by a facilitator/accommodator. This rate also sets the amount of the ordinary income the facilitator/accommodator must report.
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| Chart update 06/03/22 |
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May 2022
0.98%
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Apr 2022
0.76%
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May 2021
0.02%
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The 3-Month Treasury Bill is the rate managed by the Federal Reserve through the Fed Funds Rate as the base price of borrowing money in the short-term. It is used in determining the yield spread, which predicts the likelihood of a recession one year forward. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay.
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| Chart update 06/03/22 |
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May 2022
1.45%
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Apr 2022
1.23%
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May 2021
0.04%
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The six-month T-Bill rate is one of several indices used by lenders to periodically adjust the adjustable rate mortgage (ARM) rate. The adjusted rate equals the indexed rate (at the time of adjustment or an average of several prior rates) plus the lender’s profit margin. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay. |
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| Chart update 06/10/22 | ||
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May 2022
2.06%
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Apr 2022
1.89%
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May 2021
0.05%
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This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. The ARM interest rate equals T-Bill yield, plus the lender’s profit margin. The index is an average of T-Bill yields with maturities adjusted to one year.
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| Chart update 06/03/22 |
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May 2022
0.64%
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Apr 2022
0.47%
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May 2021
0.11%
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This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. This figure is an average of the one-year T-Bill rates for the past 12 months. The ARM interest rate equals the 12-Month Treasury Average yield plus the lender’s profit margin. There is a one-two month lag in data reporting for the 12-Month Treasury Average.
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| Chart update 06/17/22 | ||
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06/17/22
1.45%
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05/12/21
0.79%
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06/18/21
0.01%
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This index is one of several indices used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. It is taking over the LIBOR in 2021, which was found to be manipulated in the years leading up to the 2008 recession and financial crisis. The ARM interest rate equals the SOFR rate plus the lender’s profit margin. The rate is based on overnight borrowing in the U.S. Treasury repo market. The SOFR is produced in a transparent manner and is based on observable transactions, rather than models, and, unlike the LIBOR, is not dependent on bank estimates.
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| Chart update 06/17/22 | ||
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1-Month
1.51%
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6-Month
2.67%
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1-Year
3.58%
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This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. The ARM interest rate equals the LIBOR rate plus the lender’s profit margin. The rate is set by the banks in London, England.
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| Chart update 06/17/22 |
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Short (3 years or less)
June 2022
1.78%
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Medium (3 to 9 years)
June 2022
2.25%
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Long (9+ years)
June 2022
2.41%
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These rates determine minimum interest yield reportable on carryback financing. The AFR category is determined by the carryback due date. Rates are for monthly payments, reported for the coming month.
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Lots of charts and graphs with little meaning beyond that rates are and have been historically low . They provide Zero proof that a recession is imminent. Even the time frame is incorrect for predictive analysis. News Flash: CA is not the canary in the coal mine for the US Economy. Your problems there are unique to CA and how it has been mismanaged for decades.
Interest rates will remain relatively low for MANY years to come. The United States has such a large amount of debt that a significant increase in interest rates would leave the US government unable to make the payments on our debt. Defaulting on the deficit is not an option. Therefore rates will remain low.
Jeff Gundlach (the new bond king) says otherwise. IMO we will see 6% rates on 30yr mortgages in the next few years. The national economy is spiking now since money is still cheap to borrow but rates ARE going up so it makes sense to do some things now with cheaper money. Overbuilding due to speculation is a constant theme in our economy and recessions do happen. IMO mid 2019 will be the start of our next recession and the question is how shallow or severe it will be. To soon to tell due to to many factors, trade war, election results, foreign entities buying USA debt (or not).
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KISS – Keep it Simple & Stupid. Before, I sell almost everything: pots & pans, Insurance: property & Casualty; life & disability. All kinds of licenses; broker & agent licenses, even dog’s & cat’s license, I let them expired. Are we trying to be expert on extraneous matters of limited application; or to concentrate on practical & substantive issues of social engineering, better understanding, & dedicated service to clients? Let computer-brain-knowledge be ready for, far & between instant use, when needed. But, emphasis should be on KISS. After all, we are only salesmen; although, treated as professionals.
Very useful and concise information. It really tells the story very well.
I’ll have to admit the information overload is a factor in understanding, however it is good to know that First Tuesday continues to track these indices. Each chart references a brief explanation of its meaning. With continued support like this, outside of the Lending Industry interpretations, I’m starting to catch-on. First Tuesday,
you rock!