Mortgage rates have been on a wild swing upward

Mortgage rates have been on a wild swing upward for the past two months, pushing the
benchmark 10-year U.S. Treasury yield (the leading index that impacts mortgage rates) to
2.90%, the highest level since 2019 (see chart below*)

* as of April 22, 2022
The Fed has signaled that it will reduce its massive bond holdings at a maximum pace of $95
billion a month ($60 billion for Treasury securities and about $35 billion for Agency MBS) with
the caps phased in relatively quickly over a three-month period, or slightly longer if needed. It’s
expected that the balance sheet reduction will further tighten credit across the economy as the
central bank raises interest rates to cool inflation. 

The overall market sentiment seems to suggest that the Fed will continue its tightening efforts
with the goal of achieving a “soft landing.” Fannie Mae’s economists are predicting that inflation,
after peaking at 8.5% in March, may drop to 5.5% in the fourth quarter of 2022 with the
unemployment rate reaching 6% at some point in 2024, a change similar in magnitude to the
1990 and 2001 recessions.

After dipping into negative territory the week of April 15 th the yield curve (which measures the
spread between 2-year and 10-year Treasuries and is typically viewed as an accurate gauge of
short run risk in the economy - and likelihood of recession), returned to positive territory during
the week of April 14 th . On one hand, this is a positive sign that the bond markets are no longer
overly-concerned about the sort-run relative to the medium term, indicating a lower risk of
recession.

After lagging behind daily rate quotes, the Freddie Mac average 30-year fixed-rate mortgage
rate rose to 5.00% in the week of April 14 th from 4.72% the previous week. Although this has
been foreshadowed for several weeks, it is significant nonetheless because it marks the highest
level of interest rates for purchase mortgages in over a decade. In fact, the last time Freddie
Mac reported a 5% weekly interest rate was on February 12, 2011. However, even as rates
have risen dramatically, mortgage applications are relatively stable at 2018-2019 levels despite
having subsided from the 15-year highs seen last year.

Our preferred lender, HouseAmerica Financial, offers a solution for every situation:
As interest rates continue to rise and every transaction takes a heightened importance, our
preferred lender – Jobe Whelan with HouseAmerica Financial – provides solutions for
practically every borrower and every loan situation. In addition to the regular agency (Fannie
Mae/Freddie Mac) loans, Jumbo loans, and government loans (VA/FHA), HouseAmerica offers

a broad array of “non-QM” programs designed for borrowers who are unable to meet the
traditional conventional lending guidelines. These programs are ideal for investors and self-
employed borrowers – for more information please call Jobe Whelan at (818) 974-2183 or email
her at jobe@houseamericvafinancial.com