Rates March Toward 7% On Sticky Inflation Data

Mortgage rates are marching towards 7% again as inflationary pressures threaten their stability.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.88%, up from the week prior’s 6.82%. A year ago at this time, the 30-year FRM averaged 6.27%.

The 15-year fixed rate increased from 6.06% to 6.16%. A year ago, it averaged 5.54%. 

Rates have primarily stuck between 6.5% and sub-7% as they moved up in the first quarter.

Freddie Mac Chief Economist Sam Khater noted that rates moved up as inflation stayed sticky and the Central Bank’s monetary policy shifted.

“While newly released inflation data from March continues to show a trend of very little movement, the financial market’s reaction paints a far different economic picture. Since inflation decelerated from 9% to 3% between June 2022 and June 2023, the annual growth rate of inflation has remained effectively flat, ranging from 3.1% to 3.7% and averaging 3.3%. The March estimate of 3.5% annual growth is in the middle of that range. However, the market’s reaction was dramatically different, as illustrated by a significant drop in the Dow Jones Industrial Average post-announcement,” he commented.

“It’s clear that while the trend in inflation data has been close to flat for nearly a year, the narrative is much less clear and resembles the unrealized expectations of a recession from a year ago.”

Recent inflation data turned the market sour, resulting in last week’s upticks. Housing costs remained elevated in March, with the shelter component of the Consumer Price Index rising 0.4% from February.

Economists who previously predicted a series of rate cuts from the Federal Reserve in 2024 are pulling back. Bank of America and Deutsche Bank now expect just one.

Two out of every five American renters believe they will never own a home, and a third of those cite interest rates as the primary reason.

The median monthly U.S. housing payment hit an all-time high of $2,747.

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