Mortgage rates flatten amid talk of economic slowdown

Growing concerns of a slowing economy led the 30-year mortgage rate downward for a third straight week, but overall trends came in flat, Freddie Mac reported.

The 30-year fixed-mortgage rate average dropped a single basis point to 5.09% for the weekly period ending June 2, according to Freddie Mac’s Primary Mortgage Market Survey. A week earlier, the average stood at 5.1%, while one year ago, the 30-year rate was more than 2 percentage points lower at 2.99%. 

“Despite low unemployment and ongoing inflationary pressures, markets are beginning to show concern over slowing economic growth as central banks tighten monetary policy. The result is softening rates,” said Paul Thomas, vice president of capital markets at Zillow, in a research blog post. 

Moves the Federal Reserve are likely to continue making as it combats inflation, such as raising the federal funds rate, have already been largely priced in by markets, experts say. Mortgage rate movements now are left more sensitive to investor reactions toward new economic developments as they come in. 

“Inflation remains top of mind and we’ve also seen a significant retraction in the equities market, leading to questions about the overall economic outlook,” said Robert Heck, vice president of mortgage at Morty, in a statement sent to National Mortgage News. 

“Where things head from here really comes down to inflation and whether or not the market continues to settle in at these rate levels,” he added.

Data released earlier this week showed consumer confidence slipping amid surging inflation, while hiring at private employers came in at its slowest pace last month since the U.S. economy started its recovery from the pandemic. Investors will also have their eyes on May jobs numbers to be released Friday by the Bureau of Labor Statistics. 

“Markets will be analyzing lots of employment-related data this week to ascertain the potential direction of the economy based on labor markets and what impact that may have on rates going forward,” Thomas said. 

The recent interest rate surge has helped change the dynamic of homebuying after two years of market tightness, according to Freddie Mac Chief Economist Sam Khater, a “welcome” development.

“Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing,” he said in a press release.

While the 30-year rate slipped downward, the 15-year inched higher week over week, increasing to 4.32% from 4.31 seven days earlier. One year ago, the 15-year fixed-mortgage rate averaged 2.27%.

Meanwhile, the 5-year Treasury-indexed hybrid adjustable rate dropped 16 basis points to 4.04% from 4.2% one week earlier. In the same time frame a year ago, the 5-year ARM averaged 2.64%.