MortgageMortgage Rates

Lenders convince buyers to ‘marry the house and date the rate’

With mortgage rates expected to climb even higher, lenders are launching new programs to court buyers

The Federal Reserve’s tightening of monetary policy is causing mortgage rates to rise rapidly. For lenders, that means finding new ways to drum up business, like introducing programs that try to convince borrowers to ‘marry the house and date the rate.’

Mortgage rates rose more than four percentage points in 2022, up from last year’s low 3% levels. The origination market forecast expects it to plummet to about half by this year compared to 2021, and mortgage rates, which are sensitive to short-term interest rates, are expected to climb.

Prior to Wednesday’s Federal Reserve’s rate hike, the latest Freddie Mac weekly survey data showed that the 30-year fixed-rate mortgage had declined to 6.95%, a drop of 13 basis points compared to last week. Rates averaged 3.09% this time last year.

“Mortgage rates continue to hover around seven percent, as the dynamics of a once-hot housing market have faded considerably,” Sam Khater, Freddie Mac’s chief economist, said in a statement. 

The Freddie Mac index compiles purchase mortgage rates reported by lenders over the past three days. It’s focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. 

Other indexes show higher rates. 

On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine, which also includes some refinancing products, measured the 30-year conforming rate at 7.042% on Wednesday, up from 7.009% the week prior. Meanwhile, the 30-year fixed-rate jumbo (greater than $647,200) went from 6.908% to 6.912% in the same period.

Mortgage rates on Wednesday were 7.20% for conforming and 6.20% for jumbos at Mortgage News Daily, a spread of 100 bps.  

“The Federal Reserve’s continued quantitative tightening, as well as growing signs of a slowing economy, are expected to keep mortgage rates volatile in the near term,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association. “MBA expects rates to end the year around 6.7 percent.”

With Fed Chairman Jerome Powell reiterating a hawkish tone on raising the federal rates, mortgage experts and economists alike are expecting that rates won’t cool down in the coming months.

“With inflation still running at a 40-year high and the Fed expecting a few more rate increases to combat it, mortgage rates will experience upward pressure through the end of 2022,” George Ratiu, manager of economic research at, said. 

Challenges for homebuyers

Homebuyers are facing uncertainty during this transition period, as affordability issues have put buying significantly out of reach for many.

Based on the September 2021 median home price and 30-year fixed rate, and assuming a 20% down payment, the typical homebuyer would have been looking at a $1,296 monthly payment.

Given the current 7% interest rate, the median home price would have to drop to about $235,000, a decline of 45%, in order for this year’s buyer to have the same monthly payment as last year, Ratiu explained. 

In response to the heightened homebuyer affordability challenges, lenders have rolled out programs that cuts closing costs for future refis and offer seller concessions, like 2-1 rate buydowns, to court more buyers.

Among those lenders is Guild Mortgage, which launched a program that will waive lender fees on the refinance for a purchased home. Launched at the end of October, buyers must refinance by December 31, 2025. 

“With the lender covering the closing cost, it will take the pressure off of buyers, especially first time homebuyers taking advantage of the market,” said Erica Davis, an LO at Guild Mortgage. “Since we service the majority of our loans, with an interest rate decrease of 2%, borrowers won’t miss the opportunity to refinance their mortgages.”

A 2-1 rate buydown has been popular options for buyers recently. With this type of buydown, the mortgage rate will be 2% lower for the first year of the loan and 1% below the note rate for the second year. Borrowers pay the full rate for the third year and beyond.

This keeps the mortgage rate low initially, and when rates drop, borrowers have the option to refinance to a lower rate. 

“This isn’t a new concept; it’s been a tool when used appropriately that can help buyers and sellers both win,” Jeff Miller, vice president of Northwest at Churchill Mortgage, said. “As rates increase and housing corrects in 2023, sellers will want to take advantage of improving their chances to do business with an excited buyer who can obtain a lower than market rate with seller participation.”

The Fed’s next move

Borrower demand for mortgage loans has also continued to slow down amid mortgage rate volatility. 

The MBA survey showed that the mortgage composite index for the week ending Oct. 28 fell by 0.5% from the prior week and 68% compared to the same period in 2021. The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.

“Unsure buyers navigating an unpredictable landscape keeps demand declining while other potential buyers remain sidelined from an affordability standpoint,” Khater said. “Yesterday’s interest rate hike by the Federal Reserve will certainly inject additional lead into the heels of the housing market.”

The Fed has increased its benchmark rate six times this year, including four consecutive 0.75% hikes. 

Treasury yields show higher rates in the short term, which signal a recession is on the horizon. The 2-year note, closely tied to the Fed’s interest rate moves, increased 22 bps to 4.61% on Wednesday from the prior week. The 10-year note went to 4.10% from 4.04% in the same period. 

With one more Federal Open Market Committee meeting scheduled for this year, Goldman Sachs expects that the FOMC is leaning toward slowing the pace of tightening to 50 bps in December.

Roger Ferguson, former vice chairman of the board of governors of the U.S. Federal Reserve System, believes the Fed will raise interest rates by 50 bps next month, along with two 25 bps hikes at the start of 2023.


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