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After crossing the 5% threshold last week, mortgage rates have provided no indication that they’ll drop below that mark anytime soon. Rates are moving north for the seventh consecutive week, according to the latest Freddie Mac PMMS.

Purchase mortgages this week averaged 5.11%, up 11 basis points from 5% a week ago. A year ago at this time, 30-year fixed-rate purchase rates were at 2.97%. The GSE’s index accounts for just purchase mortgages reported by lenders over the past three days.

According to Sam Khater, Freddie Mac’s chief economist, mortgage rates move as Treasury yields continue to rise, causing volatility in demand. “It continues to be a seller’s market, but buyers who remain interested in purchasing a home may find that competition has moderately softened,” he said in a statement.

Another index shows mortgage rates even higher. Black Knight‘s Optimal Blue OBMMI pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association (MBA), measured the 30-year conforming mortgage rate at 5.3% on Wednesday. Meanwhile, the 30-year fixed-rate jumbo was at 4.8%.

Mortgage rates are following the Federal Reserve’s (Fed) inflation-fighting monetary policy. The central bank has signaled that it will raise rates more six times in 2022, and likely several more times in 2023.

Also, the Fed since early March has been letting its purchases of mortgage-backed securities run off. There is consensus from the Fed governors to stop replacing up to $35 billion of maturing MBS assets each month.

Cutting the Fed’s monthly MBS purchase tally will create a lot of new supply in the market, which will likely further increase pressure on interest rates, and could be amplified by other potential world events, Lawrence Yun, chief economist for the National Association of Realtors, recently told HousingWire.

According to economists, the tightening monetary policy will reduce originations in 2022 and 2023­, and can also bring a recession to the U.S. economy next year.

Higher rates are reducing borrowers’ demand. Mortgage applications dropped 5% from the past week, and refi applications were down 68% from a year ago, according to MBA. Just 2% of homeowners can save money by refinancing these days, a Fannie Mae survey showed.

This week, Fannie’s Economic and Strategic Research (ESR) Group dropped its projected single-family mortgage origination volume for 2022 from $3 trillion to $2.8 trillion. It also downsized the 2023 forecast from $2.7 trillion to $2.4 trillion. To compare, in 2021, the total was $4.5 trillion. 

“Data from U.S. economic history suggest that successfully negotiating a ‘soft landing’ requires monetary tightening to be pre-emptive rather than responsive,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement. “As such, we’ve updated our 2023 forecast to include a modest recession, but one that we do not expect to be similar in magnitude or duration to the recession of 2008.”

The 15-year fixed-rate purchase mortgage averaged 4.38% with an average of 0.8 point, up from 4.17% the week prior, according to Freddie Mac. The 15-year fixed-rate mortgage averaged 2.29% last year. The 5-year ARM averaged 3.75% with buyers on average paying for 0.3 point, up from last week’s average of 3.69%. The product averaged 2.83% a year ago.