Jeff Ostrowski | Bankrate.com (TNS)
As homebuyers grapple with record prices this spring, mortgage rates have also crept up. On a 30-year fixed loan, the average rate was 7.39% as of May 1, according to Bankrate’s survey of large lenders, marking three straight months of 7% rates.
Blame inflation. It’s still stubbornly elevated, rising to 3.5% in March, and that’s led to dialed-back expectations about how quickly the Federal Reserve cuts rates this year, if at all. The central bank left rates unchanged at its latest meeting concluding May 1.
Meanwhile, the unemployment rate was 3.98% in March, while economic growth slowed to 1.6% in the first quarter of 2024.
All of these factors have added up to an uncertain timeline for the Fed, prompting investors to bid up 10-year Treasury yields, the informal benchmark for 30-year fixed mortgage rates.
Mortgage rate predictions May 2024
As May ushers in peak real estate season, forecasters aren’t anticipating a break from the current spate of 7% mortgages.
“The wind continues to blow in the wrong direction for mortgage borrowers,” says Greg McBride, Bankrate’s chief financial analyst. “Rates have spiked as inflation runs hot, the Fed timetable for interest rate cuts gets pushed back and the supply of government debt rises. Expect mortgage rates to remain well above 7% in May, and maybe closer to 8% if the run of disappointing inflation data continues.”
Rates last hit 8% in October 2023. At that rate and the current median home price of $393,500, a borrower putting 3% down would pay about $250 more a month compared to a 7% loan.
While the Fed doesn’t establish 30-year mortgage prices, its moves can have immediate ripple effects, says Robert Frick, corporate economist at Navy Federal Credit Union.
“We shouldn’t expect relief from current high mortgage rates in May,” says Frick. “The root cause is inflation, which remains stubborn and is likely to hold steady for now. This in turn means the Fed…
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