Today's Mortgage Rates - 06/04/2023

Amid concerns about the debt-ceiling impasse, mortgage rates bumped higher this week.

As reported by Freddie Mac, the average offered interest rate for a conforming 30-year fixed-rate mortgage increased by eighteen basis points (0.18%), lifting the average rate on the most popular mortgage to 6.57%, its loftiest level since last mid-March.

Conforming fifteen-year FRMs powered higher too, with the average offered rate for the most common short-term mortgage rising by twenty-two basis points to 5.97%, more than a six-month high.

Perhaps most reflective of the market stress, which is affecting short-term yields to a greater degree than long-term ones, Freddie Mac's legacy rate survey showed the average initial fixed rate for a hybrid 5-year ARM jumping upward by twenty-nine one-hundredths of a percentage point, (0.29%) to 6.28% for the week. This is the highest weekly rate for the most common alternative to a 30-year FRM since October 30, 2008.

With a debt-ceiling deal still nowhere to be seen and a deadline looming in just a week, interest rates across the yield curve are firming, but more so on the shorter end of the curve. There has been little fundamental change in the economic or inflation picture, but perhaps enough of a brightening as to also bring into question the expectation that the Fed will skip raising interest rates at the June meeting. This is also likely adding to the uptick in rates.

The minutes of the last Fed meeting in may were released this week, revealing that Fed members weren't exactly universal in their thinking that a pause was warranted at the upcoming get together. Since that meeting, the data hasn't suggested much by way of declines in inflation, and first-quarter GDP growth was revised upward from an initial 1.1% estimate to a now 1.3% rate, so there may have been at least a little more momentum to start the second quarter than was previously believed.

Also, the labor market may not have loosened as much as thought, either. Significant downward revisions to initial claims for unemployment benefits were released this week, resetting the trend over the last three months from one where it appeared that more folks were filing for benefits to one where there's been little appreciable change since the beginning of March.

With upward pressure on underlying yields still in place, mortgage rates are still firming a bit, and borrowers should expect them to be higher through the long Memorial Day weekend. After that, what happens with a debt-ceiling deal or no will dictate where rates go.

Each week in HSH's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition of MarketTrends or subscribe for email delivery.