Mortgage rates held steady this week, remaining in the high-6% range for a 30-year fixed-term loan. Adjustable mortgage rates ticked up slightly, while most fixed mortgage rates decreased or stayed about the same.
Here are the current mortgage rates, without discount points unless otherwise noted, as of May 4:
— 30-year fixed: 6.92% (equivalent to 6.92% a week ago).
— 20-year fixed: 6.78% (down from 6.82% a week ago).
— 15-year fixed: 6.22% (down from 6.3% a week ago).
— 10-year fixed: 6.32% (down from 6.38% a week ago).
— 5/1 ARM: 5.75% (up from 5.74% a week ago).
— 7/1 ARM: 5.86% (up from 5.84% a week ago).
— 10/1 ARM: 6.1% (up from 6.07% a week ago).
— 30-year jumbo loans: 7.03% (up from 6.98% a week ago).
— 30-year FHA loans: 5.96% with 0.05 point (up from 5.95% a week ago).
— VA purchase loans: 6.17% with 0.04 point (up from 6.12% a week ago).
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“The Freddie Mac fixed rate for a 30-year mortgage moved lower this week … driven by economic volatility and recent bank failures. Meanwhile, the Federal Reserve Bank announced an interest rate hike of 25 basis points at its May FOMC meeting, setting the fed funds rate in the range of 5% to 5.25%, the highest since 2007. As the Fed’s decision was well anticipated, the rate hike is unlikely to cause significant changes in mortgage and other interest rates.”
— Realtor.com economist Jiayi Xu, in a May 4 statement
Even though the Federal Open Market Committee voted to raise the federal funds rate by another 25 basis points last week, mortgage rates aren’t expected to rise in turn. Banks and lenders had already priced in another Fed rate hike, so mortgage interest rates are likely to hold steady for now.
Importantly, Fed officials made some significant phrasing changes in the post-meeting FOMC statement. In previous statements, policymakers wrote that the committee “anticipates that some additional policy firming may be appropriate.” However, the current statement reads that the FOMC will monitor incoming data “in determining the extent to which additional policy firming may be appropriate.”
“That’s a meaningful change that we were no longer saying that we ‘anticipate,'” said Fed Chair Jerome Powell during a news conference. “So we’ll be driven by incoming data, meeting by meeting.”
The new wording implies that the central bank may not raise rates again this year, putting the current terminal rate between 5% and 5.25%. Depending on how the economy adjusts to higher rates, with the possibility of a looming recession and uncertainty in the banking sector, the Fed may even decide to cut rates down the line. But at this point, officials are more tight-lipped than usual about future policy decisions.
While a recession would be bad news for the U.S. economy as a whole, there would be one silver lining: Mortgage rates would start to dip. In fact, most economists predict that 30-year mortgage rates will fall below 6% by the end of the year, due in part to an expected economic slowdown.
[Compare: Mortgage and Refinance Rates in Your Area.]
Indicator of the Week: A Drowsy Spring Housing Market
At a time when for-sale signs are typically sprouting up alongside the daffodils and tulips, this spring housing market has been eerily dormant. While it’s natural to think that these gloomy conditions are caused by hibernating homebuyers who are holding out for lower rates, that’s not necessarily the case. Instead, the problem is coming more from the supply side, with sellers unable to warm up to the current rate environment.
“Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability,” says Sam Khater, Freddie Mac’s chief economist.
The count of new listings in April was 21.3% lower this year compared with last April, according to a housing market report from Realtor.com. As a result of tight inventory, the number of days a home spends on the market between listing and pending sale has pulled back in recent months, from 74 in January to 49 in April — although homes are still selling much more slowly than last April, when the median days on market was just 32. Home listing prices have begun to creep up, too. “In a typical year, we would expect to see the number of homes for sale begin to increase more significantly from this point forward,” says Xu. “However, mortgage rates remain elevated, leading many sellers to report feeling ‘locked in’ by their current low mortgage rate and planning to wait until rates come down before selling, leading to fewer newly listed homes than a year ago.”
With few options of existing homes for sale, homebuyers have been increasingly turning to new construction homes. New home sales were up 9.6% between February and March, Realtor.com data shows, with many homebuilders offering incentives like mortgage rate buydowns that can offset the higher price tag of new builds.
Only time will tell whether lower mortgage rates in the coming months will cause the chilly housing market to thaw.
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Spring Mortgage Forecast: Rates Will Stay Above 6%
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Mortgage Rates Remain Elevated After Fed Meeting originally appeared on usnews.com
