Mortgage rates were little changed this week as investors assessed Federal Reserve Chairman Jerome Powell’s latest comments on rate hikes. To summarise: A very strong labor market remains the main driver behind the Fed’s rate setting decisions and further tightening is yet to come.
Thank you for reading this post, don't forget to subscribe!Freddie Mac’s The Primary Mortgage Market Survey, which focuses on conventional and conforming loans with 20% down payments, shows the 30-year fixed rate averaged 6.71% as of June 29, up marginally from 6.67% last week. In contrast, the 30-year rate stood at 5.70% at the same time a year ago.
Other mortgage indexes also show a slight increase in rates.
The 30-year fixed rate for conventional loans was 6.91% mortgage news daily Thursday morning, up one basis point from last week. of housingwire the mortgage rate center showed optimum blue The 30-year fixed rate for conventional loans was 6.69% on Wednesday, compared to 6.66% last week.
“Mortgage rates have been in the 6% to 7% range for more than six months and, despite affordability constraints, home buyers saw new home sales rise to their highest in more than a year,” said Sam Khater, chief economist at Freddie Mac. adjusted and operated at the level. in a statement. “Sales of new homes have been stronger than the resale market due to a slightly higher supply of new construction. The recovery in demand has resulted in firming up of prices, which have now increased for several months in a row.
Consumer confidence and new home sales remained strong this week, but investors are still eyeing the Federal Reserve’s next move after holding off on rate hikes in June. Future decisions from the central bank will indicate what to expect for the remainder of 2023.
At a banking conference in Europe on Thursday, Federal Reserve Chairman Jerome Powell said inflation is well above the Fed’s long-term target of 2%.
“Since the beginning of last year, we have increased our policy rate by 5 percentage points. We see the impact of our policy tightening on demand in the most interest rate-sensitive sectors of the economy, particularly housing and investment. However, it will take time to feel the full effects of monetary restraint, especially on inflation,” Powell said in his speech.
“With the Fed holding off on monetary tightening relief until its July meeting, capital markets are assessing the outlook for the second half of 2023,” said George Ratiu, chief economist at the Washington Post. keep current,
The economy and job market are still expanding, Ratiu comments, allowing housing to stabilize.
On the downside, the Federal Reserve has made clear that inflation is still hotter than expected, and additional rate hikes are likely. Based on the central bank’s future guidance, most economists expect two more rate hikes in the coming months. The Fed sees the still-strong job market as an obstacle to containing inflation. Ratiu expects this to be intended to make a big dent in payrolls, which risks damaging consumer confidence and pushing the economy into recession.
Even with weekly volatility, the 10-year Treasury has been hovering around 3.7% since mid-May, operating in a stable 100-basis point range, Ratiu said. “Investors are welcoming signs of economic resilience in the middle of the year after a tumultuous 12 months dominated by recession concerns. Signs of strength this week came from a consumer confidence number that hit a 17-month high, and a jump in new home sales.
Jia Xu, an economist realtor.comsaid that while the Fed’s rate hike “could create near-term upward pressure on interest rates, including mortgage rates, we expect a gradual decline that would bring rates to 6.0% by the end of the year.” Can bring you closer to.”
In addition to persistently high mortgage rates and housing prices, a lack of housing supply has worsened the situation for first-time home buyers.
“Thankfully, builders are paying attention to the needs of the market and are trying to meet the demand through new construction, especially for low-cost homes. After falling below 10% in 2022, the proportion of new homes sold for less than $300,000 is trending upward,” Xu said.
