Mortgage Rates Hit 19-Year High Despite Fed's Stance

The Federal Reserve has kept interest rates steady for 231 consecutive days, but mortgage rates have continued to rise. The latest data from Freddie Mac shows a 30-year fixed mortgage rate of 6.67% as of August 13, up from 5.98% in late February.

The mechanism behind this phenomenon is often misunderstood: the Fed sets short-term interest rates, but mortgage rates are influenced by the 10-year Treasury yield plus a mortgage-backed security spread.

As inflation remains high, bond investors have become increasingly concerned about future inflation, driving up long-term yields. Lawrence Yun, chief economist at the National Association of Realtors, stated that 'higher bond yields on long-dated securities, like the 30-year Treasury, clearly indicate discomfort over persistently high inflation in the future.'

Companies such as D.R. Horton and loanDepot are feeling the impact of rising mortgage rates, with cancellations climbing to 20% and market caps plummeting.