The average 30-year fixed-rate mortgage fell for a third straight week, hitting its lowest level since mid-February, but remarks from Wednesday's Federal Reserve meeting immediately spiked interest rates and could indicate a trend reversal.
According to Freddie Mac's Primary Mortgage Markets Survey, the 30-year average for the weekly period ended June 17 fell to 2.93%, down three basis points from 2.96% the previous week. The last time the average was four months ago, it was 2.81% for the period up to February 18. In the same week a year ago, the 30-year fixed-rate mortgage averaged 3.13%.
But developments on Wednesday after a meeting of the Fed committee immediately skyrocketed government bond yields and related mortgage rates.
The Federal Open Market Committee announced that it is getting closer to its bond-buying program, which was launched during the pandemic to prop up the economy during the Covid-19 pandemic. The current pace of economic recovery also led the central bank to forecast two rate hikes in 2023. The federal interest rate is now close to zero.
The announcements came after Chairman Jerome Powell stated repeatedly for several months that despite signs of a picking economy amid rapidly rising inflation and more working Americans, the Fed had no plans to hike rates even though the number of jobs was slower than forecast had risen.
“More important than any forecast is the fact that politics will remain highly accommodating with every launch. Reaching the conditions for a withdrawal will mainly signal that the rebound is strong and no more hold rates near zero are required, ”Powell said.
Wednesday's hikes were a harbinger, according to Zillow economist Matthew Speakman, who says "more moves are likely to be on the way in the coming days".
“The Federal Reserve's insistence that the latest inflation figures were temporary and that no changes in monetary policy would be required until the economy made far greater progress has kept rates in check for months. And in the last few weeks it seemed increasingly that this stance would have to be changed in order for interest rates to go up significantly, ”he said in a statement.
The average weekly mortgage rate in Freddie Mac's surveys has remained at 3% or below since mid-April. The highest average recorded to date in 2021 was 3.18% for the period ending April 1.
Despite the spate of low interest rates this year, high home prices dampened mortgage activity due to limited availability, which has limited demand. Home prices will remain high, according to Sam Khater, Freddie Mac's chief economist.
"With stocks tight, the slowdown in demand has not yet affected prices, which means summer is likely to remain a strong sellers' market," said Sam Khater, Freddie Mac's chief economist.
While the 30-year rate fell for the week, the average 15-year fixed-rate mortgage rose from 2.23% to 2.24%. In the same week of 2020, the rate was 2.58%.
The 5-year Treasury-indexed Adjustable-Rate Mortgage Average [ARM] fell three basis points lower from week to week, falling from 2.55% to 2.52%. A year ago, the 5-year ARM average was 3.09%