Why mortgage rates are fluctuating so much in 2022

Why mortgage rates are fluctuating so much in 2022
Homebuyers signing a mortgage.Getty Images
  • The average US fixed rate for a 30-year mortgage rose to 5.22% this week — up from 4.99% one week prior.
  • Mortgage rates have seesawed many times in 2022.

Over the last few years, historically low mortgage rates have enticed millions of Americans to purchase homes.

But pandemic-era mortgage deals are over and rates have been stuck on a proverbial see-saw for weeks.

The average US fixed rate for a 30-year mortgage came in at 5.22% this week, Freddie Mac reported in its weekly mortgage market survey. The rate soared from last week's reading of 4.99% and is a tremendous increase from a pandemic low of 2.68% in December 2020.

"The 30-year fixed-rate went back up to well over five percent this week, a reminder that recent volatility remains persistent," Sam Khater, the chief economist at Freddie Mac, told Insider.

Mortgage rates have been fluctuating as the Federal Reserve attempts to cool inflation by raising interest rates. Rate hikes coupled with soaring home prices have made housing far less affordable for many would-be buyers, leading many to wonder when mortgage rates will stabilize. But as volatility in the economy seeps into the real estate market, they could be waiting for a while.

Len Kiefer, an economist at Freddie Mac, told Insider that's because mortgage rates depend largely on inflation as well as economic activity in the US and global financial markets — and right now the outlook looks bleak.


"Inflation has a big impact on the Treasury market, which is sort of the linchpin that's driving a lot of the activity," he said.

The Treasury market is a key component of US and global financial systems. Treasury bonds are perceived as a predictable investment and are guaranteed by the US government. However, soaring inflation coupled with aggressive increases in the Fed's overnight funds rate — a measure of bank funding costs — has resulted in higher Treasury yields this year. Kiefer says it has helped to influence mortgage rate volatilit.

"The money that the bank or the lender is going to provide a consumer comes from loans that are securitized in the secondary market, so that means they are looking at what investors in that market are looking at, which is often the 10-year Treasury yield," Kiefer said.

"What is happening in the Treasury market is going to influence the funding costs for mortgage-backed securities investors," he said. If something results in higher yields on Treasuries or MBS, lenders will respond with higher rates for consumers, he added.

Kiefer says this ultimately influences the costs a borrower will pay for their mortgage.


"There's a lot of uncertainty around the path of inflation and the overall economy and as views on that change, market participants adjust and that affects the pricing on Treasuries, which then passes through to the mortgage market."

According to Kiefer, this is the crux of mortgage rate volatility.

"I would expect that we may continue to see some volatility throughout the rest of this year as expectations and market conditions evolve," he said. "We very well could see rates come down from where they are, but they could also very easily go up quite a bit."

In June, the average US fixed rate for a 30-year mortgage nearly reached 6%, according to data from Freddie Mac. As rates rise, buyers of a median-priced home are now looking at monthly mortgage payments that are more than $400 higher than they were just a year ago.