The Knudson File: Rapid Rise in Mortgage Rates over the Past 3 Weeks–How Does This Compare to Rates Since 1971?

Mortgage rates over the past 3 weeks have increased 82 bps.   Reviewing Freddie Mac rates over the past 51 years places the 82 bps increase in the top 1% of ALL changes.

The chart below indicates the one-week, two-week, and three-week change and resulting standard deviations in the Freddie Mac 30-year rates.  Indeed, the past 3 are a very, very rare event. It should also be noted that the 82 bps increase occurred when rates were 4.05%.  In 1981 similar large increases occurred but rates were ~17.75%.

Rates Dating Back to 1971

Freddie Mac has weekly 30 Year mortgage rates going back to 1971. The highest rate was 19.18% and it occurred on October 9,1981 while the lowest rate of 2.83% occurred on January 7, 2021. The average for this 51 year time span is 8.09% Freddie Mac includes both rates and points. Dividing points by 4 and adding it to the stated rate provides a zero points, mortgage rate.

Rate Changes in ONE Week (in Basis Points)

The 51 year time span has 2,660 weeks. Calculating the ONE week rate change provides a distribution curve seen below. Nearly 50% of the weeks had changes between -10 bps and +10 bps. For EACH of the 3 weeks ending leading up to 3.31.22 resulted in increases of 31, 26 and 25. 3 Standard Deviations of weekly changes is 33. Each of the weeks were in the 2% chance of any ONE week occurring, let alone 3 consecutive weeks.

Rate Changes in TWO Weeks (in Basis Points)

Two week change in rates, 60% are between -10 and +10. The two week change ending 3.31.22 was 51bps. 3 Standard Deviations of two week changes is 53 bps which means the 3.31.22 two week change is nearly a 1% change event over the past 51 years.

Rate Changes in THREE Weeks (in Basis Points)

For the three week change in rates, 50% are between -10 and +10. The three week change ending 3.31.22 was 82 bps. 3 Standard Deviations of three week changes is 71 bps which means for the 3.31.22 three week change it was a 1% chance of this event occurring over the past 51 years.

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