Mortgage rates ticked down again, the second consecutive week of declines.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.69%, down from 6.71% the week prior.
A year ago at this time, the 30-year FRM averaged 5.78%.
The 15-year fixed-rate mortgage increased, however, up from 6.07% to 6.10%. A year ago, it averaged 4.81%.
“Mortgage rates decreased slightly this week in anticipation of the pause in rate hikes by the Federal Reserve,” said Sam Khater, Freddie Mac’s Chief Economist.
The pause did come: after ten consecutive increases, the Fed declined to raise interest rates at its June meeting.
“We have been seeing the effects of our policy tightening on demand in the most interest-rate-sensitive sectors of the economy, especially housing and investment,” Fed Chairman Jerome Powell said in prepared remarks. “It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.”
But Powell suggested that at least two more increases may be necessary to tame inflation, though he emphasized that no decisions had been made.
The reason for the future uncertainty in interest rates continues to be inflation, which is still “well above” the Fed’s longer-run 2% goal. The Summary of Economic Projections released concurrently with Wednesday’s announcement kept that 2% target destined for 2025.
Lisa Sturtevant, chief economist at Bright MLS, told Bankrate that she’s betting the Fed will double down on this target and continue hikes.
“It is extremely unlikely that the Fed will back down from that [2%] goal, since they have been out so forcefully and consistently with the intent to reach that milestone. As a result, we’re probably going to see the Fed resume rate increases at its next meeting, which could raise the probability that the economy will head into a mild recession if not later this year, then by the beginning of next year,” she said.
Khater, noting the current rate of deflation, predicts the same timeline.
“As inflation continues to decelerate, economic growth is slowing and the tightening cycle of monetary policy is reaching its apex, which means mortgage rates are expected to decrease later this year and into next,” he said.
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