By Samantha Delouya, CNN
(CNN) — Americans shopping for a home caught a break this week when mortgage rates edged lower.
The average 30-year fixed mortgage rate fell to 6.47% this week, down from 6.52% last week, which was near the year’s high, according to data released Thursday by Freddie Mac.
But the reprieve may not last. On Wednesday, the Federal Reserve, now led by President Donald Trump appointee Kevin Warsh, signaled it could consider raising interest rates later this year in response to the latest inflation spike tied to the US-Israeli war with Iran.
Last week, two separate reports from the Bureau of Labor Statistics showed that annual inflation rose in May to its highest level in three years. That followed stronger-than-expected employment data.
The 10-year Treasury yield, a key driver of mortgage rates, climbed higher after the reports raised concern that inflation may be more stubborn than investors had hoped for. Bond yields rise when prices fall.
The US-Iran peace plan, announced on Sunday, briefly calmed those fears, sending yields lower for several days. But the relief evaporated on Wednesday amid renewed fears of a rate hike coming this year.
“It’s clear that we’re in a new era and it’s going to take a while for markets to figure out how to react to today’s Fed meeting,” Chen Zhao, the head of economic research at Redfin, said on Wednesday. “But one thing is certain: the committee as a whole is taking inflation very seriously, which means mortgage rates are unlikely to retreat much in the near future.”
Many home shoppers may not be willing to wait around for mortgage rates to fall below 6% anymore.
Pending home sales in May increased by 3.8% month-over-month and 4.8% year-over-year, according to a report released on Wednesday by the National Association of Realtors.
“A late spring buyer rush — even with mortgage rates not budging — is an indication of pent-up housing demand and consumers’ acceptance of above-6% mortgage rates as the new normal,” said NAR chief economist Lawrence Yun.
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Easing tensions with Iran push mortgage rates lower — but a potential Fed rate hike clouds the outlook News Channel 3-12.
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