Finance
Mortgage rates hover near 7% with no sign of budging: Freddie Mac
Mortgage rates have stalled near 7% with the Fed’s plan to dial back interest rates delayed. (iStock)
Mortgage rates hovered in the 6.8% range again this week and are likely to remain in that range despite improving inflation metrics, according to Freddie Mac.
The average 30-year fixed-rate mortgage was 6.82% for the week ending April 4, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s an increase from the previous week when it averaged 6.79%. A year ago, the 30-year fixed-rate mortgage averaged 6.28%.
The average rate for a 15-year mortgage was 6.06%, down from 6.11% last week and up from 5.64% last year.
The Federal Reserve has signaled that it is in no rush to lower interest rates and is committed to maintaining its restrictive monetary policy until it gets further indication that inflation is moving towards its 2% target rate. Fed Chair Jerome Powell said recently that the plan to lower interest rates is still on track but that the central bank will monitor inflation and other economic indicators to determine when that happens. Market expectations are that the first rate cut will come in the summer, if not later in the year.
“Mortgage rates showed little movement again this week, hovering around 6.8 percent,” Freddie Mac’s Chief Economist Sam Khater said. “Since the start of 2024, the 30-year fixed-rate mortgage has not reached seven percent but has not dropped below 6.6 percent either.
“While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term,” Khater continued. “On the plus side, inventory is improving somewhat, which should help temper home price growth.”
If you are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.
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Mortgage apps plunge as interest rates steady
Elevated mortgage rates continued to weigh down on home buying. The Mortgage Bankers Association (MBA) said Wednesday that purchase applications have fallen for three consecutive weeks and dropped 0.6% from one week earlier. Refinancings dropped 2% and were 5% lower year-over-year.
“Mortgage rates have hovered around 7 percent recently, leading to a three-week slide in mortgage applications,” MBA President and CEO Bob Broeksmit said. “Although the home purchase market remains subdued, the uptick in FHA purchase applications is an indication that first-time buyers are active this spring despite continuing supply and affordability headwinds.”
Additionally, elevated mortgage rates and high home prices have now made renting a better month-to-month deal than buying a starter home in all 50 markets, according to the Realtor.com February 2024 Rental Report.
If you’re looking to become a homeowner, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.
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For sale housing inventory improving
Spring homebuying activity will likely be affected by the still-too-high borrowing costs, however, housing inventory is improving. According to Relator.com, an increasing number of homeowners are choosing to put their homes up for sale despite having to relinquish their lower mortgage rates to move in today’s housing market.
Homes listed for sale increased 23.5% in March compared with the same time in 2023, according to Realtor.com’s March 2024 Housing Trends Report. Moreover, in the first three months of 2024, the inventory of homes actively for sale was at its highest level since 2020. Much of the activity has been driven by homes priced in the $200,000 to $350,000 range.
“A higher mortgage rate has been a deal breaker for many over the last year, but an increasing number of homeowners are choosing to sell as we approach what is the ideal time–the week of April 14-20,” Realtor.com Chief Economist Danielle Hale said. “The number of homes actively for sale is at its highest level for this time of year since 2020.”
If you’re considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.
HIGH HOMEOWNERS INSURANCE RATES SCARING AWAY FLORIDA HOMEBUYERS, OTHER STATES FACE THE SAME ISSUE
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WASHINGTON – The Federal Reserve on Wednesday lowered its key interest rate by a quarter percentage point, the third consecutive reduction and one that came with a cautionary tone about additional reductions in coming years.
In a move widely anticipated by markets, the Federal Open Market Committee cut its overnight borrowing rate to a target range of 4.25%-4.5%, back to the level where it was in December 2022 when rates were on the move higher.
Though there was little intrigue over the decision itself, the main question had been over what the Fed would signal about its future intentions as inflation holds steadily above target and economic growth is fairly solid, conditions that don’t normally coincide with policy easing.
In delivering the 25 basis point cut, the Fed indicated that it probably would only lower twice more in 2025, according to the closely watched “dot plot” matrix of individual members’ future rate expectations. The two cuts indicated slice in half the committee’s intentions when the plot was last updated in September.
Assuming quarter-point increments, officials indicated two more cuts in 2026 and another in 2027. Over the longer term, the committee sees the “neutral” funds rate at 3%, 0.1 percentage point higher than the September update as the level has drifted gradually higher this year.
“With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Chair Jerome Powell said at his post-meeting news conference. “We can therefore be more cautious as we consider further adjustments to our policy rate.”
“Today was a closer call but we decided it was the right call,” he added.
Stocks sold off following the Fed announcement while Treasury yields jumped. Futures pricing pared back the outlook for cuts in 2025 to one quarter point reduction, according to the CME Group’s FedWatch measure.
“We moved pretty quickly to get to here, and I think going forward obviously we’re moving slower,” Powell said.
For the second consecutive meeting, one FOMC member dissented: Cleveland Fed President Beth Hammack wanted the Fed to maintain the previous rate. Governor Michelle Bowman voted no in November, the first time a governor voted against a rate decision since 2005.
The fed funds rate sets what banks charge each other for overnight lending but also influences a variety of consumer debt such as auto loans, credit cards and mortgages.
The post-meeting statement changed little except for a tweak regarding the “extent and timing” of further rate changes, a slight language change from the November meeting.
Change in economic outlook
The cut came even though the committee jacked up its projection for full-year gross domestic product growth to 2.5%, half a percentage point higher than September. However, in the ensuing years the officials expect GDP to slow down to its long-term projection of 1.8%.
Other changes to the Summary of Economic Projections saw the committee lower its expected unemployment rate this year to 4.2% while headline and core inflation according to the Fed’s preferred gauge also were pushed higher to respective estimates of 2.4% and 2.8%, slightly higher than the September estimate and above the Fed’s 2% goal.
The committee’s decision comes with inflation not only holding above the central bank’s target but also while the economy is projected by the Atlanta Fed to grow at a 3.2% rate in the fourth quarter and the unemployment rate has hovered around 4%.
Though those conditions would be most consistent with the Fed hiking or holding rates in place, officials are wary of keeping rates too high and risking an unnecessary slowdown in the economy. Despite macro data to the contrary, a Fed report earlier this month noted that economic growth had only risen “slightly” in recent weeks, with signs of inflation waning and hiring slowing.
Moreover, the Fed will have to deal with the impact of fiscal policy under President-elect Donald Trump, who has indicated plans for tariffs, tax cuts and mass deportations that all could be inflationary and complicate the central bank’s job.
“We need to take our time, not rush and make a very careful assessment, but only when we’ve actually seen what the policies are and how they’ve been implemented,” Powell said of the Trump plans. “We’re just not at that stage.”
Normalizing policy
Powell has indicated that the rate cuts are an effort to recalibrate policy as it does not need to be as restrictive under the current conditions.
“We think the economy is in really good place. We think policy is in a really good place,” he said Wednesday.
With Wednesday’s move, the Fed will have cut benchmark rates by a full percentage point since September, a month during which it took the unusual step of lowering by a half point. The Fed generally likes to move up or down in smaller quarter-point increments as its weighs the impact of its actions.
Despite the aggressive moves lower, markets have taken the opposite tack.
Mortgage rates and Treasury yields both have risen sharply during the period, possibly indicating that markets do not believe the Fed will be able to cut much more. The policy-sensitive 2-year Treasury yield jumped to 4.3%, putting it above the range of the Fed’s rate.
In related action, the Fed adjusted the rate it pays on its overnight repo facility to the bottom end of the fed funds rate. The so-called ON RPP rate is used as a floor for the funds rate, which had been drifting toward the lower end of the target range.
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