By Top companies in the mortgage industry are in a freefall this week as mortgage rates continue their strong upward trend. UWM Holdings (UWMC) dropped to $1.17 on Wednesday, down by 80% from its highest point this year, with its market capitalization falling to $2.25 billion.
Rocket Companies (RKT), the biggest mortgage lender in the US, dropped to $11.30, down by over 53% from the year-to-date high. Better Home & Finance (BETR) also plunged to a record low of $9.95, down by 80% from its peak.
Rocket Companies, UWMC and Better stocks are tumbling
US mortgage rates continued soaring
The ongoing retreat in Rocket Companies, Better Home & Finance, and UWM is happening as US mortgage rates surge. Data shows that the average 30-year mortgage rate soared to 7.49% on Wednesday, the highest level in three years. Analysts predict that the rate may jump to 9%.
The surge coincided with the ongoing surge in US Treasuries, with the ten-year yield jumping to 5.313% and the five-year hitting 5.03%. The spread between the 10 and 10–year continued widening as well.
US Treasury yields are rising as investors react to the soaring US public debt, which has jumped to over $40.2 trillion. At the same time, there are no signs that Congress is working to address the reckless spending that has widened the budget deficit over time.
There are also concerns that the biggest holders of US debt will start selling. China has already sold debt worth over $600 billion in the last decade. In a statement this week, Ray Dalio said that top holders like China and Japan will exit their US debt positions over time.
There are also signs that Scott Bessent’s Treasury buybacks are not working out as yields have continued rising since then.
At the same time, US inflation remains elevated. The headline and core Consumer Price Index (CPI) have remained above the Federal Reserve’s target of 2.0% in the last five years. This sticky inflation may remain as crude oil and gas prices continue rising. Brent, the global benchmark, rose to $101.70, while the West Texas Intermediate (WTI) has moved to $90.
Rocket Companies, Better, and UWM are affected by higher rates
These companies are usually exposed to the rising mortgage rates because they usually affect originations. Higher rates make homes less affordable, causing fewer people to buy. Refinancing also falls harder because many buyers refinance when the new rate is lower than the current rate.
At the same time, owners with cheap mortgages often avoid selling their homes and taking on a high rate.
Despite these challenges, some of these companies released strong financial results, meaning that the stock performance is mostly because of expectations of a slowdown. Better Homes & Finance said that its revenue rose by 28% to $54.7 million, with its net loss improving by 39% to $14 million. Its growth was because the company shifted production to purchase and home equity as its volume remained flat.
Rocket Companies’ revenue jumped to $5.7 billion from $2.7 billion, while its net income jumped from $229 million to $526 million.
UWM, on the other hand, said that its revenue jumped to $888 million from $758 million in the same period last year.
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