A line graph above a house points down to reflect a drop in mortgage interest rates.
Illustration by Lanette Behiry/Real Estate News

Mortgage rates hold relatively steady after inflation report 

The 30-year fixed-rate mortgage averaged 6.69% this week in the Freddie Mac Survey, down just a hair from last week’s 6.71%.

June 15, 2023
2 minutes

Key points:

  • The Fed announced a pause in rate hikes this week, but the effect on the mortgage market has yet to be seen.
  • Even with inflation cooling, borrowing is expected to remain expensive compared to recent years.
  • Mortgage applications rose on a weekly basis, but activity is still well below what it was a year ago.

Mortgage rates ticked down slightly this week as inflation cooled and the Federal Reserve announced the first pause in interest rate hikes since March 2022.

The 30-year fixed-rate mortgage averaged 6.69% this week, down slightly from 6.71% the week before. It was the second straight decrease in the Freddie Mac survey. This comes after a report showing that while inflation is still elevated at 4%, it is slowing down significantly.

If inflation continues to slow, mortgage rates are expected to decrease later this year and into 2024, said Sam Khater, Freddie Mac's chief economist.

Still, inflation is not cooling as quickly as some expected, so it may take time to see a significant shift in the economy, and the Fed suggested future rate hikes are likely later this year.

"Though slowing inflation signifies better economic conditions ahead, borrowing, including for a home purchase, is likely to remain expensive for the remainder of the year," said Hannah Jones, Realtor.com economic data analyst.

Currently, the difference between the 10-year Treasury yield, which is below 4%, and the 30-year mortgage rate is wide, as market uncertainty has kept mortgage rates higher. This gap is an indication that more volatility lies ahead, said George Ratiu, chief economist for Keeping Current Matters.

"If the spread was in line with the historical average, the 30-year fixed rate would be closer to 5.5%," Ratiu said.

Mortgage Daily News, which provides a daily snapshot of mortgage rates, showed little change in the 30-year fixed-rate after the Fed's rate pause announcement. On June 15, the daily rate average was at 6.97%.

Even though rates have barely budged in the past week, mortgage applications rose 7.2%, according to the Mortgage Bankers Association. Homebuyers were likely taking advantage of the dip in rates from the week before. Even so, applications for home purchases were down 27% from a year ago.

While the 30-year rate went down, the 15-year fixed-rate mortgage averaged ticked up this week to 6.1%. Last week it averaged 6.07%.

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