The 2-basis-point rise in the 30-year fixed rate mortgage, even with the huge decline in Treasury yields, is a reaction to inflation and growing doubts that short-term rate cuts are on the horizon.
The 30-year FRM was at 6.53% on May 28, the Freddie Mac Primary Mortgage Market Survey found. This compared with 6.5%
The same week-to-week gain was recorded for the 15-year FRM, to 5.87%. For the
"Pending home sales have increased three months in a row, indicating there's latent demand and homebuyers are ready to jump back into the market if mortgage rates decline," Freddie Mac Chief Economist Sam Khater said in a press release.
What happened with the 10-year Treasury this week
Since getting close to 4.69% on May 19, the 10-year Treasury yield has trended lower over hopes a ceasefire with Iran is imminent and the Strait of Hormuz will reopen, allowing oil tankers to leave the area.
On Wednesday, the yield closed at 4.48%. By 11 a.m. on Thursday morning it was another 2 basis points lower, to 4.46%.
Optimal Blue's tracker reflects the decline from May 19 through May 26, with the conforming 30-year dropping 16 basis points. But it turned higher for May 27, rising 1 basis point to 6.48%.
Lender Price data on the National Mortgage News website at that time had the 30-year FRM at 6.72%, an 8 basis point improvement from the prior week's 6.8%.
In a Wednesday evening statement, Kara Ng, senior economist at Zillow Home Loans, said increases in the 30-year FRM has stalled for now.
"Inflation concerns remain front and center for markets, driven by elevated energy prices, hotter-than-expected April consumer and producer price readings, and renewed uncertainty around the Fed's rate path," Ng said. "Still, some easing in geopolitical tensions has allowed bond yields to come down slightly."
The stall is a good news, bad news situation, said Kate Wood, NerdWallet's lending expert.
"This week's mix of headlines — hey-things-are-improving and wait-no-they-aren't — meant that week-over-week, the average 30-year rate didn't change a ton," she said in a Thursday morning comment. "As of this morning, mortgage rates appear poised to rise based on reports of renewed aggressions, but a positive update on negotiations could easily reduce that pressure."
The shift in views on Fed rate cuts
At last week's Mortgage Bankers Association Secondary and Capital Markets Conference, the organization's economists are now expecting the
The April Personal Consumption Expenditures Index was 3.8%, which throws out any thoughts of a rate cut, said Nigel Green, CEO of financial advisory of the deVere Group, adding the Fed faces a brutal reality.
"Markets spent months convincing themselves rate cuts were inevitable," Green said in a commentary. "Inflation data like this destroys that argument."
The mentality has shifted from how many Fed rate cuts would take place this year to a realization that an increase is more likely.
"Donald Trump wants lower rates, Wall Street wants lower rates, and consumers want relief from borrowing costs," Green said. "But none of those pressures change the inflation data confronting the Fed."
The near-term is murky, Ng said.
"We previously noted that the housing market's 'uncooling' would depend heavily on how long the energy and rate shock lasted," she commented. "With the geopolitical conflict now dragging on for a couple of months, sales are still likely to exceed last year's levels, but our forecast for transaction growth has been revised down by roughly one-third."
