Mortgage rates have dropped again, despite inflation rising to a 13-year high – so what’s going on?

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While analysts worried about high inflation in the US economy, mortgage rates fell again.

30-year fixed rate mortgages averaged 2.94% for the week ended May 13, down two basis points from the previous week, Freddie Mac
FMCC, St.
-1.65%

reported on Thursday… The base mortgage rate has decreased since the end of March, when it reached the highest level since June last year and for a month now it has remained below 3%.

Meanwhile, the 15-year fixed rate mortgage fell 4 basis points to an average of 2.26%. The five-year adjustable rate mortgage, indexed by the Treasury, averaged 2.59%, down 11 basis points from the previous week.

“Low rates offer homeowners the opportunity to lower their monthly payments through refinancing, and our latest research shows that many borrowers, especially black and Hispanic borrowers who could benefit from refinancing, are still not using this option,” said the chief economist. Freddie Mac Sam. This is stated in the message of Hater.


“The last time inflation soared to this high in one month. Freddie Mac’s 30-year mortgage rate was 16.9%. ”


– Daniel Hale, Chief Economist at Realtor.com

A low-rate environment is also a boon for those looking to buy a home at a time when house prices are rising due to high demand and lack of supply in the market.

The fall in mortgage rates came as a bit of a surprise to market watchers, given this week’s reports suggesting inflation is picking up in the economy.

The price of consumer goods reached their highest level in 13 years in April, This is evidenced by the US consumer price index published on Wednesday. A separate report released Thursday morning showed similar inflationary pressures on wholesale prices.

“The last time inflation soared to this high in one month. Freddie Mac’s 30-year mortgage rate was 16.9%, ”said Danielle Hale, chief economist at Realtor.com.

“While I don’t expect double-digit mortgage rates anytime soon, I still expect mortgage rates to follow the rise in Treasury yields as the combination of abundant supply and inflation concerns means investors expect higher returns.” – she added.


“In theory, a sharp rise in inflation will force the central bank to tighten policy by raising interest rates or slowing down the pace of bond purchases.”


– Matthew Speakman, Zillow Economist

10-Year Treasury Bond Yield
TMUBMUSD10Y,
1.452%

has risen by almost 11 basis points in the past five days.

The Federal Reserve has largely dismissed concerns about inflation. In many cases, price increases appear to be a fluke associated with a pandemic. For example, airfare has skyrocketed, which may be a reflection of a sudden renewed interest in travel in people as vaccinations spread.

But if the April inflation figures persist for a longer period of time, the national bank is likely to react. And this can affect mortgage rates.

“In theory, a sharp rise in inflation will force the central bank to tighten policy by raising interest rates or slowing down the pace of bond purchases,” said Matthew Speakman, an economist at Zillow.
Z,
+ 1.57%

ZG,
+ 0.83%

Any deviations from the Fed’s current forecast, he added, “will put more pressure on mortgage rates.”

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