It is anticipated that mortgage rates will continue to rise through June, following a pattern of gradual increases that began in April after higher tariffs were announced.
The impact of these tariffs on interest rates has been felt since April and May. The 30-year fixed-rate mortgage has remained above 6.75% since mid-April, causing many potential buyers to face affordability challenges. While home prices are still rising in some parts of the country, others, like Texas and Florida, are experiencing a decline in home prices.
Long-term interest rates are expected to continue on an upward trend
Economic factors are driving long-term interest rates higher for the foreseeable future, as noted by Joseph Brusuelas, the chief economist at RSM US. He pointed out that long-term interest rates, including mortgage rates, are increasing due to shifts in economic policies and a decrease in globalization.
The widening gap between 30-year and 10-year bond yields indicates a potential acceleration in economic growth, higher inflation rates, and an increased demand for a higher policy rate from the Federal Reserve, leading to rising long-term interest rates.
Overall, it is unlikely that interest rates, including mortgage rates, will see a significant decrease in the near future.
Forecasts from other sources
Fannie Mae and the Mortgage Bankers Association predict that mortgage rates will average around 6.5% to 6.7% from April to June. However, for these forecasts to be accurate, rates would need to decrease significantly in June, as they averaged 6.8% from April to May.
Both Fannie Mae and the MBA anticipate a decrease in mortgage rates from June onwards, but historical trends show rates have mostly remained above 6.75% since November. Any fluctuations below this level have been short-lived, with rates quickly rebounding.
Federal Reserve’s stance
The Federal Reserve is currently navigating through a period of uncertainty, as highlighted by Fed Chair Jerome Powell. The central bank is closely monitoring economic indicators to determine the impact of tariffs on imported goods, inflation, and the possibility of a recession before making any policy decisions.
Powell emphasized the need to wait and observe the evolving economic landscape before taking any definitive action. The upcoming meeting of the Fed’s monetary policy committee in June is expected to maintain the current short-term federal funds rate.
Trends in housing prices
Recent data shows a slowdown in the rate of house price appreciation, with a 4% increase nationwide from the first quarter of 2024 to the first quarter of 2025. Certain markets, such as Newark, Detroit, and Providence, have experienced double-digit price growth, while others like Lakeland-Winter Haven, Florida, have seen price declines.
Factors such as high mortgage rates and a limited housing supply have influenced the housing market dynamics. While demand may be decreasing due to affordability challenges, supply constraints continue to support prices in most regions. However, areas like Florida and Texas are facing unique challenges that are impacting home prices.
Reviewing May’s predictions
Previous forecasts suggested that mortgage rates could fluctuate in May due to various economic factors. In reality, rates experienced minor fluctuations throughout the month, ultimately ending higher than in April according to Freddie Mac’s survey.