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Mortgage rates are a lot like spring weather, changing just frequently enough to keep you checking the forecast. At least for now, rate trends feel less like a thunderstorm and more like a stubborn spring drizzle.
The average rate on a 30-year fixed-rate mortgage rose 17 basis points to 6.42% APR in the week ending May 21, according to rates provided to BW by Zillow. (A basis point is one one-hundredth of a percentage point.) We calculate our weekly average using daily APRs recorded over the past five business days.
No one really knows when the skies will clear, including incoming Federal Reserve Chair Kevin Warsh, who is scheduled to be sworn in tomorrow. He’ll inherit the unenviable task of balancing stubborn inflation against a cooling job market.
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Fed meeting minutes indicate shifting forecast
Yesterday, we got the tea — er, meeting minutes — from the most recent Federal Reserve meeting on April 28-29. We already know the conclusion: The central bankers voted to keep the federal funds rate unchanged, in a widely expected move.
But the newly released notes suggest policymakers are becoming more concerned that inflation may linger longer than expected. Higher oil prices tied to the war in Iran were a major reason why.
Fed officials warned that rising energy and transportation costs could continue working their way into consumer prices in the months ahead, even if the war in Iran ends. And that’s before the central bankers saw the latest Consumer Price Index, which dropped two weeks after the Fed meeting, showing that annual inflation heated up to its highest rate since May 2023.
“This was a tough week for bonds on multiple levels,” explains Kate Wood, lending expert at BW, noting inflation data as well as ongoing geopolitical tensions with China and Iran. “U.S. debt doesn’t carry the clout it once did. Traders are demanding higher yields, and mortgage rates generally rise along with yields.”
In other words: Homebuyers waiting for a perfectly sunny mortgage rate forecast may be waiting a while.
My advice for putting roots down
Some good news might be on the horizon: Iran says it’s reviewing a U.S. peace proposal to end the conflict. For would-be homebuyers, does that mean it’s worth holding out to see if lower mortgage rates will follow?
Whether you are ready to move on from your current home or are settling down for the first time, understanding how much house you can realistically afford is more important than simply going after the best mortgage rate.