The average 30-year fixed-rate mortgage rate increased to 6.79% for the week ending June 1. That’s up from last week when it averaged 6.57%. A year ago, it averaged 5.09%.
Meanwhile, the average 15-year fixed-rate mortgage rate increased to 6.18%, up from last week when it averaged 5.97% and last year, when it averaged 4.32%.
“Mortgage rates jumped this week, as a buoyant economy has prompted the market to price-in the likelihood of another Federal Reserve rate hike,” said Sam Khater, Freddie Mac’s chief economist. “Although there has been a steady flow of purchase demand around rates in the low to mid six percent range, that demand is likely to weaken as rates approach seven percent.”
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DEBT CEILING DEFAULT WOULD BATTER HOUSING MARKET: ZILLOW
Mortgage applications dip
In light of an uncertain interest rate environment, the volume of mortgage applications has decreased, according to the latest Mortgage Bankers association (MBA) data.
Mortgage applications decreased 3.7% for the week ending May 26, the MBA said.
“Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon,” said Mike Fratantoni, MBA’s SVP and chief economist.
Still, some experts have forecasted lower mortgage rates in the near future. Sixty-three percent of experts polled by Zillow said they expected that, between 2023 and 2025, the first quarter of 2023 would have the highest 30-year fixed mortgages, according to a report published in March.
The same panel also said they expected home prices to decline through the rest of this year.
“The majority of experts are now predicting an outright decline in U.S. home prices in 2023,” Pulsenomics’ Terry Loebs said in a statement.
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More interest rate hikes are possible, Fed says
Despite increasing interest rates ten times since the beginning of 2022 to reduce inflation, the Fed said it’s considering another spike for its upcoming meeting set for mid-June.
“I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2 percent objective,” Fed Governor Christopher J. Waller said at an economic summit in Santa Barbara, California.
Nonetheless, inflation has shown signs of slowing. The consumer price index (CPI), a measure of inflation, increased 4.9% year-over-year in April, a drop from its 5% bump in March and its 9.1% peak in June 2022.
“Inflation remains too high, and the clock is ticking before the Fed’s next meeting,” Morning Consult’s Chief Economist John Leer said in a statement. “After falling from 40-year highs, inflation appears to be settling in at an uncomfortably elevated level.
“Rate hikes are back on the table at the Fed’s June meeting, although ongoing stresses in the banking sector may tighten financial conditions on their own, effectively tightening monetary policy without additional intervention from the Fed,” Leer continued.
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