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Mortgage rates continued to soar this week as more worrying inflation data put to rest lingering expectations of a rate cut by the Federal Reserve this spring.
Mortgage rates began to rise on Tuesday with the release of the latest Consumer Price Index (CPI) data, which showed annual inflation at 3.2% in February.
February data released on Thursday boosts rally momentum producer price index (PPI) data showed that prices charged by domestic producers of goods and services rose by a seasonally adjusted 0.6% from January to February, twice as much as economists expected. The 1.6% annual increase in PPI was the largest increase since September 2023, when the annual rate was 1.8%.
A Mortgage News Daily survey of lenders shows interest rates 30-year fixed-rate mortgage It rose for a fourth consecutive day on Thursday, rising 8 basis points to 7.02%. A basis point is one percent, and MND’s survey showed 30-year fixed-rate mortgage rates rose 17 basis points this week.
Barometer of soaring mortgage rates
The 10-year Treasury yield, a barometer of mortgage rates, is rising this week. source: Yahoo Finance.
Produced in 10-Year Treasury Bondwhich area good indicator The next move for mortgage rates surged 11 basis points to 4.30% on Thursday, up 21 basis points from Friday’s closing price.
Federal Reserve policymakers said in their December summary of economic forecasts that they expect to cut interest rates three times this year. While bond market investors had expected a rate cut as early as May, the latest economic data caused investors to abandon those bets.
this CME Group Fed Watch ToolData tracking futures market expectations for the Fed’s next move showed investors on Thursday saw only a 4% chance of the Fed cutting interest rates in May, down from 38% on February 13. Futures markets on Thursday were still pricing in a 63% chance of one or more rate cuts by June 12, down from 82% on February 14.
A report released by the U.S. Department of Labor on Thursday showed Weekly jobless claims drop It could also be a concern for hawkish Federal Reserve policymakers, as a strong job market supports wages while employers still struggle to fill many job openings.
Although a report from the Commerce Department on Thursday showed retail sales Economic growth fell short of expectations in February, with many Fed policymakers worried more about curbing inflation than the prospect of a recession.
Chris Lowe
“When the Fed considers a series of rate cuts and is faced with a sudden slowdown in economic growth and a sudden increase in inflation, they react to new news on inflation every time,” said Chris Low, chief economist at FHN Financial. Reuters.
Forecasters at Pantheon Macroeconomics gave up on that forecast on Thursday after sticking to their prediction that the Fed would begin cutting interest rates in May.
Pantheon chief economist Ian Shepherdson said in a note to clients that the PPI data showed stronger economic growth from the Federal Reserve. Preferred inflation indicatorpersonal consumption expenditures (PCE) index.
The PCE index is Trend down The Fed’s 2% inflation target was lowered to 2.4% in January.
Pantheon expects February’s core PCE, which excludes volatile food and natural gas prices, to improve from January’s data released on March 29. Core PCE, a more reliable indicator of underlying inflationary trends, grew at an annual rate of 2.8% in 2019. January.
Ian Shepherdson
But the forecast for core PCE growth of 0.37% month-on-month in February “remains disappointing, which reduces the possibility of the Fed easing policy in May, so much so that we postponed our forecast (for the Fed’s first rate cut) to June,” Shepherdson wrote.
Mortgage rates rise again
Tracked Loan Lock Data best blueData lagged one day showed borrowers locked in rates on 30-year fixed-rate mortgages at 6.76% on Wednesday. This is up 6 basis points from Monday and 26 basis points from the 2024 low of 6.50% set on February 1.
While Optimal Blue data shows rates are moving back towards the 2024 peak of 6.93% recorded on February 28, they still have a long way to go back to the 2023 high of 7.83% recorded on October 25 .
Interest rates reported by Mortgage News Daily (MND) tend to be higher than Optimal Blue’s rates because the MND Index is Adjust to estimate The effective interest rate offered to borrowers, regardless of the number of points they are willing to pay. Optimal Blue uses the contract rate provided for the rate lock, Even if the borrower has paid points to get a lower interest rate.
Demand for mortgages picked up last week for a second straight week, reversing weeks of declines as would-be homebuyers took advantage of falling mortgage rates.
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