Mortgage rates increased again last week due to signs that beating inflation may take a while.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.79%, up from 6.57% the week prior.
A year ago at this time, the 30-year FRM averaged 5.09%.
The 15-year fixed-rate mortgage also spiked from 5.97% to 6.18%. A year ago, it averaged 4.32%.
“Mortgage rates jumped this week, as a buoyant economy has prompted the market to price-in the likelihood of another Federal Reserve rate hike,” said Sam Khater, Freddie Mac’s Chief Economist.
Federal officials have hinted that the Central Bank is considering further interest rate hikes later in the year, even if they skip one in June.
Fed Governor Philip Jefferson said in a speech this week that “skipping a rate hike at a coming meeting would allow [Fed policymakers] to see more data before making decisions” about other increases.
Federal Reserve Bank of Philadelphia President Patrick Harker made similar comments, endorsing a pause in June to “let some things resolve themselves” before making another move.
The Fed has raised rates by five points in the last fourteen months in its fight against inflation, pushing its benchmark to 5.1%, the highest in 16 years. Harker noted that while the Fed is succeeding, disinflation is happening at a much slower pace than expected.
Analysts expect the Central Bank to cut the federal funds rate sometime toward the end of 2023. Mortgage rates in specific should follow inflation down over the next year, though predications vary about how long that will take.
Until rates come down, unaffordability will continue to put pressure on the housing market.
“Although there has been a steady flow of purchase demand around rates in the low to mid six percent range, that demand is likely to weaken as rates approach seven percent,” Khater added.
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