The past week has seen a sharp increase in mortgage rates, with the average 30-year fixed rate reaching 6.96% as of Thursday. This rise in rates comes as a result of strong economic data that has been driving the market. Last week, mortgage rates already rose by 0.1 percentage point, increasing to 6.81%. The Federal Reserve’s tightening of monetary policy also contributed to this upward trend.
With rates now at their highest level since November, financing a home purchase has become more expensive. Compared to the same period last year, buying a $400,000 home now costs an additional $300 per month due to the higher rates.
Despite the unfavorable news for prospective buyers, there might be some hope for a decline in rates next week. This optimism stems from investors’ reaction to recent inflation data. If this initial reaction holds, it could lead to a decrease in mortgage rates in the coming week.
The recent increase in rates can be traced back to the employment data released last week. When this data showed stronger-than-expected results, the 10-year Treasury yield, which often influences mortgage rates, experienced a significant jump. As a result, mortgage rates followed suit and rose.
Overall, the current situation depicts a real estate market that has been impacted by strong economic data and tightened monetary policies. However, there is still potential for rates to decrease in the near future if market conditions remain favorable.
Economic Data May Drive Mortgage Rates Lower Next Week
Economic data released this week could potentially lower mortgage rates next week, as indicated by Freddie Mac’s gauge of rates. Government data released on Wednesday revealed that inflation in June softened more than anticipated.
The 10-year yield experienced a significant decline on Wednesday, falling by 0.12 percentage point to 3.86%, marking the largest one-day decline since May 30, according to Dow Jones Market Data. This downward trend continued on Thursday, with the yield reaching 3.769% as of 12:30 p.m.
Freddie Mac’s chief economist, Sam Khater, noted that incoming data suggests a decline in inflation, reaching its lowest annual rate in over two years. However, housing costs, which contribute significantly to inflation, remain high due to low inventory relative to demand.
A different publisher of daily mortgage rate data, Mortgage News Daily, reports that mortgage rates have already decreased from recent highs. Their survey of the 30-year fixed mortgage rate has shown a decline every day since July 7.