Mortgage rates increased across most fixed- and adjustable-rate home loans this week, with the average rate on a 30-year fixed mortgage bouncing higher to 6.92%. This is the first weekly increase since early March, ending a monthlong downward trend that had been improving affordability conditions for homebuyers ahead of the spring housing sales season.
Here are the current mortgage rates, without discount points unless otherwise noted, as of April 13:
— 30-year fixed: 6.92% (up from 6.83% a week ago).
— 20-year fixed: 6.8% (up from 6.71% a week ago).
— 15-year fixed: 6.14% (up from 6.1% a week ago).
— 10-year fixed: 6.28% (up from 6.26% a week ago).
— 5/1 ARM: 5.66% (equivalent to 5.66% a week ago).
— 7/1 ARM: 6.2% (up from 5.85% a week ago).
— 10/1 ARM: 6.07% (down from 6.09% a week ago).
— 30-year jumbo loans: 7% (up from 6.89% a week ago).
— 30-year FHA loans: 6% with 0.06 point (up from 5.81% a week ago).
— VA purchase loans: 6.16% with 0.05 point (up from 5.96% a week ago).
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“The uncertainty over the economic outlook and the Fed’s effectiveness in taming inflation without damaging consumer spending will keep the 30-year fixed mortgage rate in the same 6% to 7% range it has been for the past eight months.”
— George Ratiu, chief economist at Keeping Current Matters
Mortgage rates are still widely expected to fall during 2023, but the expectation is that rates won’t dip below 6% until the second half of the year. There’s an important distinction to make here: Mortgage interest rates will decline, but they’re unlikely to reach the record low of 2.65% seen in January 2021 — probably ever. While the pain of rapidly rising rates in 2022 kept many homebuyers on the sidelines, consumers have begun to acclimate to the new normal and recognize that elevated rates are here to stay.
“Rates have spent the past 12 months mostly above 5%, making today’s levels more acceptable and lessening some of the initial shock consumers experienced in 2022,” Ratiu says.
That being said, buyers are sensitive to any downward fluctuation in mortgage rates. Existing-home sales rebounded in February when rates fell to the lowest point of this year, and mortgage purchase demand spiked last week as rates dipped again, according to the Mortgage Bankers Association.
“Prospective homebuyers responded to lower rates last week, leading to an 8% jump in applications to buy a home,” says Bob Broeksmit, MBA’s president and CEO. “The likelihood of even lower rates in the months ahead should lead to increased demand, despite recent signs of a slowing economy and tighter financial conditions.”
Additionally, seasonal demand usually picks up in the spring and summer as many homeowners prepare to list their home for sale. This year’s spring homebuying season is still expected to be relatively mild compared with the past two years, but mortgage rates won’t keep buyers on the sidelines forever.
[Compare: Mortgage and Refinance Rates in Your Area.]
Indicator of the Week: Sticky Rent Inflation
The Bureau of Labor Statistics released its latest consumer price index report on April 12, showing that inflation continued rising but at a more moderate pace of 5% year over year. That’s down from the peak of 9.1% last June, and it’s the slowest rate of inflation in nearly two years.
Prices actually declined in a number of categories such as gasoline (-17.4%), fuel oil (-14.2%) and used vehicles (-11.2%). Cooling inflation is welcome news for price-burdened consumers as well as Federal Reserve policymakers, who are trying to curb price growth to the target rate of 2% annually. With signs of stabilizing prices, the Fed may decide to end its series of rate hikes this year, reaching a projected terminal federal funds rate of between 5% and 5.25%.
However, Fed officials haven’t claimed victory over inflation just yet. Consumers continue to drive services demand with discretionary spending on airline fares (17.7%) and food away from home (8.8%). Inflation also remains elevated in a number of necessary spending categories such as auto insurance (15%), car repairs (13.3%), electricity (10.2%), food at home (8.4%) and shelter (8.2%).
On that note, rent payments take up a large part of the average consumer’s budget, making stubbornly high rent prices particularly influential over inflation as a whole. Rents remain significantly higher on an annual basis, but monthly price growth finally began receding in March.
“Though still up by a whopping 8.8% from a year ago, the monthly gain was much lighter at 0.45% compared to the 0.7% to 0.9% monthly gain over the past year,” says Lawrence Yun, chief economist at the National Association of Realtors. “It was inevitable for rent growth to soften, considering the robust apartment construction.”
Rent inflation is expected to continue slowing in the coming months, and, if it does, the overall inflation rate will drop further in turn. In the meantime, all Americans are paying more money for groceries, transportation and shelter, all while homebuyers face inflated housing payments this spring as a result of higher mortgage rates and home sales prices.
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Mortgage Rates Rise, Ending Monthlong Downward Slide originally appeared on usnews.com