Rates Move Back Up Over 7%

Homebuyers only enjoyed one week of sub-7% rates before the 30-year mortgage moved above that mark again.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.03%, up from the week prior’s 6.94%. A year ago at this time, the 30-year FRM averaged 6.79%.

The 15-year also rose from 6.24% to 6.36%. A year ago at this time, it was 6.18%.

Rates dipped below 7% the week prior for the first time in more than a month but reversed course on shifting market dynamics.

“More hawkish commentary about inflation and tepid demand for longer-dated Treasury auctions caused market yields to rise across the board. This reality, as well as economic signals that have moved sideways over the last few weeks, have resulted in mortgage rates drifting higher as markets continue to dial back expectations of interest rate cuts,” said Sam Khater, Freddie Mac’s Chief Economist.

Expectations for Fed rate cuts have changed drastically from the start of the year. Just months ago, some analysts expected multiple cuts by 2025. Since then, predictions have drifted to one, possibly none.

Some experts argue that the Central Bank needs to hike rates again in order to contain inflation, including Former New York Fed President Bill Dudley.

“I think [the neutral inflation rate] is a lot higher than the Fed recognizes — which means the central bank isn’t doing enough to fight inflation,” he wrote in an article for Bloomberg.

“Perhaps the Fed’s mantra, instead of ‘higher for longer,’ should be ‘higher indefinitely’ until inflation moves more convincingly in the desired direction.”

Economic data out this week appears more measured. The personal consumption expenditures price index, excluding food and energy costs, increased 0.2% in April, in line with expectations.

Still, the Central Bank needs inflation to actively move down before considering rate cuts.

“If I’m [Fed Chair Jerome] Powell, I’d like to see that start moving down, and it’s barely creeping. … I’m not reaching for the Pepto yet, but I’m not feeling great. This is not what you want to see,” Dan North, senior economist for North America at Allianz Trade, told CNBC.

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