The week of April 11 saw a spike in mortgage rates, with the 30-year fixed rate nearly reaching 7%. The idea of reduced interest rates appeared further off with the announcement of fresh inflation data.
Zillow provided NerdWallet with rates on a 30-year fixed-rate mortgage, which averaged 6.94% APR, up 19 basis points from the average the previous week. One tenth of a percentage point is called a basis point.
APR on a 15-year fixed-rate mortgage averaged 6.19%, which was 19 basis points more than the average for the prior week.
APR on a 5-year adjustable-rate mortgage averaged 7.86%, which was 15 basis points more than the average for the prior week.
This month has seen an increase in mortgage rates, and the most recent economic statistics made it less likely that they will decline very soon. The most recent consumer price index was issued by the Bureau of Labor Statistics on April 10. One of the main objectives of the Federal Reserve is to control inflation, and the CPI is a crucial indicator of the rate of inflation. In an effort to curb inflation, the Fed increased interest rates and is currently maintaining them at this level.
However, the CPI for March came in hotter than anticipated, rising year over year at a rate of 3.5%, well above the Federal Reserve’s target of a 2% rate of inflation. The year started out with great expectations of rate cuts from the Federal Reserve, but those expectations are ebbing. According to the Fed governors’ most recent official prediction in March, we should expect the equivalent of three 25-basis-point cuts in 2024, which would lower the federal funds rate by 0.75%. The question is when those cuts might occur, though, as the timeline seems to keep slipping.
While Fed officials haven’t changed their forecast from March, they have also said time and time again that data will guide all decisions and that managing inflation remains a major concern. “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” stated Fed Chairman Jerome Powell in a speech at Stanford University earlier this month. We still have time to let the latest statistics inform our policy decisions, given the health of the economy and the progress made thus far in reducing inflation.”
All of this suggests that prospective homeowners who are waiting for interest rates to drop may need to lower their expectations. The best-case scenario in this situation could be rates being unchanged rather than climbing, but mortgage interest rates could be forced higher if economic data continues to contradict the Federal Reserve’s policies. The wisest course of action for eager purchasers could be to concentrate on what their budgets can support at the present interest rates rather than holding out hope for a substantial decline anytime soon.