Rates Cool For Second Week

Average mortgage rates declined for a second week as inflation moderated in the Fed’s preferred inflation indicator.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.02%, down from the week prior’s 7.09%. A year ago at this time, the 30-year FRM averaged 6.39%.

The 15-year also fell, down from last week’s 6.38% to 6.28%. A year ago at this time it was 5.75%.

“Mortgage rates decreased for the second consecutive week,” said Sam Khater, Freddie Mac’s Chief Economist. “Given the news that inflation eased slightly, the 10-year Treasury yield dipped, leading to lower mortgage rates. The decrease in rates, albeit small, may provide a bit more wiggle room in the budgets of prospective homebuyers.”

Even a small change is positive for potential buyers and sellers following rates closely. With a 7% rate on a $300,000 loan, borrowers would pay $1,996 per month. With a 6.5% rate, you’d pay $100 less.

The Consumer Price Index rose 3.4% year over year in April, cooling from the month prior. This was the first time the pace of inflation has declined in 2024. 

That being said, rates are still clocking above 7%, and many homeowners have no desire to give up sub-5% rates locked in during the pandemic.

Nor does the Central Bank have any incentive to cut rates on the basis of one report. Other inflation measures fared more poorly than the CPI, suggesting inflation is still sticky.

“[Inflation is] still a full percent higher than the Fed’s target,” Gregory Heym, chief economist at Brown Harris Stevens, told CNET. “When inflation has been trending flat or up slightly, I don’t know that you’re going to make that up in half a year. Unless something dramatic happens, the economy won’t need rate cuts.”

Higher rates have slowed the housing market with declines in home sales and new construction.

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