Rates took a turn for the worse last week, rising back to nearly 7%, as economic data soured analysts’ moods on easing rates.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.87%, up from the week prior’s 6.74%. A year ago at this time, the 30-year FRM averaged 6.42%.
This breaks a two-week streak of declines. Mortgage applications slipped this week as rate-sensitive Americans backed away from the market.
The 15-year fixed rate also rose from 6.16% to 6.21%. A year ago, it averaged 5.68%.
The Central Bank outlined cuts to come in 2024 but held the benchmark rate steady during their March meeting.
Inflation has eased over the past year but committee members do not believe it will be appropriate to reduce rates until they have gained more confidence inflation is moving sustainably toward 2%, which has been their goal.
Greg McBride, Bankrate’s chief financial analyst, said an “uncertain” timeline for lower rates and ongoing inflation pressures are keeping rates elevated.
“As inflation and economic growth moderate in the coming months, this should prompt a more meaningful and sustained decline in mortgage rates, but it is entirely contingent on tamer inflation results,” he commented.
Treasury spreads, which mortgage rates follow, are also bigger than their historical averages. The yield gap between mortgage bonds and Treasurys is about 1.5%, while the typical spread pre-pandemic was around 1%. Some experts believe this will be the new normal for the industry.
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