Home Topics Real Estate Inflation concerns are not reflected in the latest mortgage rate survey

Inflation concerns are not reflected in the latest mortgage rate survey

A weekly mortgage rate survey by Freddie Mac shows interest rates continue to fall, but the seven-day snapshot of average rates doesn’t fully reflect the new data that pushed rates up this week due to renewed inflation concerns.

A closely watched Freddie Mac weekly mortgage rate survey shows interest rates continue to fall, but the seven-day snapshot of average rates doesn’t fully reflect the new data that pushed rates up this week due to renewed inflation worries.

Freddie Mac reported that for the week ending May 13:

  • Prices on 30 year fixed rate mortgage an average of 2.94 percent with an average of 0.7 points, compared with 2.96 percent last week and 3.28 percent a year ago.
  • To the 15 year fixed rate mortgageThe average rates were 2.26 percent with an average of 0.6 points, compared with 2.30 percent last week and 2.72 percent a year ago.
  • Prices on 5-year hybrid, floating rate Treasury index mortgage (ARM) loans averaged 2.59 percent, averaging 0.3 points, compared with 2.70 percent last week and 3.18 percent a year ago.

10-year government bond yields – a useful measure of where mortgage rates could be – rose on Wednesday after Bureau of Labor statistics announced that the consumer price index, which measures the change in prices paid for goods and services by consumers , up 4.2 percent year over year in April, the biggest increase since September 2008.

The producer price index – a measure of how companies pay producers – also rose by 6.2 percent compared to the previous year. This is the biggest increase in records since 2010.

The Optimal Blue Mortgage Market Indices showed that compliant 30-year fixed rate mortgage rates rose Tuesday and Wednesday to hit 3.194 percent during the week.

Daily 30 year fixed rate mortgage rate changes

Source: Optimal blue mortgage market indices.

Danielle Hale

Realtor.com Chief Economist Danielle Hale noted that core inflation – which excludes more volatile food and energy prices – saw its biggest one-month jump in 39 years.

“The last time inflation rose this much in a month, Freddie Mac’s 30-year mortgage rate was 16.9 percent,” Hale said. “While I don’t expect double-digit mortgage rates in the near future, I do expect mortgage rates to follow higher government bond yields as the combination of plentiful supply and inflation concerns lead investors to expect higher returns.”

Sam Khater | Photo credit: Freddie Mac

Freddie Mac’s chief economist Sam Khater admitted that while low mortgage rates were “a boon to the property market” they may not last long as “consumer inflation has accelerated and increased at its fastest pace in more than 12 years Mortgages can lead to summer rates. “

On the other hand, a disappointing job report last week gives the Federal Reserve leeway to continue buying government bonds and mortgage-backed securities to keep interest rates under control.

In late April, the Federal Reserve reiterated its intention to keep short-term interest rates near 0 percent until unemployment falls and inflation is “on track to moderately exceed 2 percent for some time”. The Fed said it will continue to buy at least $ 80 billion worth of government bonds and $ 40 billion worth of mortgage-backed securities every month “until substantial further progress is made” to meet its employment and inflation targets.

Christopher Waller

In a speech today, Federal Reserve Governor Christopher Waller described the job report as “a big surprise to me and most of the people.” But he said it probably shouldn’t have been “because it fits with what we’ve heard from companies about labor shortages. GDP is back to pre-pandemic levels, but we’ve only regained 14 million of the 22 million jobs lost last spring. “

Demand for hiring is likely to continue to drive wages higher over the next few months, and some of that spike will impact prices, Waller said. But “as soon as the labor supply has caught up, this wage pressure should ease.”

The economy “is tearing up, it’s going to gangbusters – choose your favorite metaphor. But we need to remember that it comes from a deep hole and we are just about to go back to where we were before the pandemic. “

While inflation is likely to exceed the Fed’s longer-term target of 2 percent in 2021, there is no reason to fear “sustained high inflation rates,” said Waller – or that the Fed will adjust its accommodative measures immediately.

Waller described residential construction as “a ray of hope in the economy that encourages investment and increases household wealth”. “However, the rapid growth in house prices in most areas of the United States is being watched closely,” he warned.

“Housing is becoming less affordable and this price hike is having the biggest impact on the low-income individuals and families, who have had the most trouble since last spring and are always the most vulnerable to rising rents and house prices,” Waller said.

“The prices of sawn timber and other raw materials for residential real estate are skyrocketing, and while this event has no material impact on inflation, it limits the supply of new homes and helps fuel the boom in property prices. Fortunately, the banking system is strong and resilient – it went through several Fed stress tests and one tough real-life stress test over the past year. Even so, I am closely monitoring this sector for signs of stress and will continue to do so. “

Email Matt Carter

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