Mortgage rates ease despite inflation worries

Mortgage rates continue to ease despite worries that the Federal Reserve will eventually have to take measures to fight inflation, with rates on 30-year fixed-rate mortgages continuing to inch further below 3 percent. "Mortgage rates continue to drift down as markets concur with the view that inflation increases are temporary,” Freddie Mac Chief Economist Sam Khater said in a statement. “While mortgage rates are low, purchase demand has weakened over the last couple of months, primarily due to affordability constraints stemming from high home prices. With inventory tight, the slowdown in demand has yet to impact prices, meaning the summer will likely remain a strong seller’s market.” For the week ending June 17, Freddie Mac’s weekly Primary Mortgage Market Survey reported average rates for the following types of loans:

• For 30-year fixed-rate mortgages, rates averaged 2.93 percent with an average 0.7 point, down from 2.96 percent last week and 3.13 percent a year ago. Rates for 30-year loans hit an all-time low of 2.65 percent in records dating to 1971 during the week ending Jan. 7, 2021.
• Rates on 15-year fixed-rate mortgages averaged 2.24 percent with an average 0.6 point, up slightly from 2.23 percent last week but down from 2.58 percent a year ago. The all-time low for 15-year fixed rate mortgages in records dating to 1991 was also seen during the week ending Jan. 7, 2021, when rates averaged 2.16 percent.
• For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.52 percent with an average 0.3 point, down from 2.55 percent last week and 3.09 percent a year ago. Rates on 5-year ARM loans hit an all-time low of 2.56 percent during the week ending May 2, 2013, in Freddie Mac records dating to 2005.

Freddie Mac’s survey tracks conventional, conforming, home purchase loans for borrowers who put 20 percent down and have excellent credit. Borrowers taking out bigger loans, making smaller down payments, or with lower credit scores can expect to be quoted higher rates. Mortgage rates surged in February and March on fears that the Fed will soon be forced to take steps to counter inflation. The Consumer Price Index was up 5.0 percent from a year ago in May, the biggest annual increase since August, 2008. This week, Fed policymakers restated their commitment to continue buying $80 billion in long-term Treasurys and $40 billion in mortgage-backed securities each month “until substantial further progress has been made” toward the Fed’s employment and price stability goals. Those purchases are credited with helping keep mortgages and other long-term interest rates low. In a statement, members of the Federal Open Market Committee acknowledged worries about inflation, but characterized them as largely transitory. For now, the Fed is willing to let inflation rise “moderately above 2 percent for some time” as long as longer-term expectations remain “well anchored” at 2 percent. However, in a forecast released this week, economists at Fannie Mae warned that rents and home prices are a significant component of inflation, and that rising housing costs could drive inflation out of the Fed’s comfort zone. Fannie Mae economists downgraded their forecast for second and third quarter home sales, citing listings shortages and constraints on homebuilders that are denting home sales and driving up home prices and rents.