The mortgage market rollercoaster might be on hold, but the volatility has been traded for stickiness as rates remain stuck just beneath the 7% threshold.
As of Thursday, the 30-year, fixed-rate mortgage had increased slightly to an average of 6.81%, according to mortgage giant Freddie Mac, a buyer of loans from banks. The 15-year, fixed-rate mortgage also increased, averaging 5.92%.
Though it’s a marginal shift, this week’s data is part of a larger trend: Mortgage rates are stuck. For the past five weeks, the average 30-year, fixed-rate mortgage has stayed within a roughly 0.1% range.
To be sure, even small changes in mortgage rates can provide savings for borrowers, but the reality is a contrast to the slowdown in mortgage rates that many economists and industry insiders anticipated at the start of the year.
Daily mortgage rates — more volatile than weekly averages — had also increased as of Thursday afternoon in response to investor activity. The daily 30-year, fixed-rate mortgage had risen to 6.99% and the 15-year, fixed-rate mortgage had increased to 6.34%.
Inventory boost, not mortgage rates, is driving buyers
Even as mortgage rates stagnate, buyers are slowly, but surely, reentering the housing market.
In the week ended May 9, mortgage applications had increased 1.1% compared to the previous week, according to the Mortgage Bankers Association. It’s a small increase resulting from stability in the market, but what’s more notable is the comparison to a year earlier.
“The news for the week was the growth in purchase applications, up 2.3% and almost 18% higher than last year’s pace,” Mike Fratantoni, the association’s chief economist, said in a statement.
What’s driving that growth if mortgage rates aren’t changing? Inventory, according to Fratantoni.
“Despite the economic uncertainty, the increase in home inventory means there are additional properties to buy, unlike the last two years," he said, "and this supply is supporting more transactions.”
Bob Broeksmit, the association’s president and CEO, said the group “expects activity to pick up even more if mortgage rates move further below 7%.”
New data about the economy will set the tone
The mortgage market is largely driven by data about the economy — and how investors react to that data.
It’s a sort of inverse relationship in which “bad news is good news for mortgage rates” and vice versa, according to Melissa Cohn, regional vice president of William Raveis Mortgage. In other words, when the economy gets good news, that usually sends mortgage rates higher. When there’s bad news about the economy, mortgage rates will likely ease.
“It’s a strange concept, but mortgage rates live in this very contrarian world,” Cohn said in an interview.
That concept is tangible this week. For one, President Donald Trump met with leaders in China over the weekend about tariffs, a move that calmed fears that the U.S. economy would take a big hit and inflation would skyrocket as a result of the import taxes.
And while that’s good for the economy at-large, it means mortgage rates won’t be seeing any drastic declines — especially because a better inflation outlook changes the Federal Reserve’s approach, another piece of the puzzle that dictates investor behavior.
Then, on Thursday morning, a handful of datasets about different sectors of the economy, including retail sales and wholesale prices, were released, painting a clearer picture of how the market fared in April. The takeaway from that data: Tariffs are already starting to squeeze the economy.
All told, it’s always somewhat complicated to predict where mortgage rates are headed, and recently that’s been made even more difficult by the uncertainty introduced by tariffs and their effects on the economy, many of which have yet to manifest.
“Rates are stuck, hovering just under 7, as the market waits for clarity on how tariffs will actually impact inflation,” Nicole Rueth, a lender in Colorado, told personal finance website Bankrate. “None of it moves the needle until we know whether tariffs are going to fuel inflation or stall the economy.”