Today's Mortgage Rates - 06/09/2023

Mortgage rates softened a little as investors consider the Fed's next move.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage decreased by eight basis points (0.08%), trimming the average rate on the most popular mortgage to 6.71%, its first decline in a month.

Conforming fifteen-year FRMs also retreated a bit, with the average offered rate for the most common short-term mortgage falling by eleven basis points to 6.07%.

With a realistic chance that the Fed will only skip a single meeting and not embark on a longer pause, short-term rates have been more elevated of late, and also more stubborn to decline. Freddie Mac's legacy rate survey showed the average initial fixed rate for a hybrid 5-year ARM edging lower this week, but only by three one-hundredths of a percentage point (0.03%), drifting to 6.38%. This is just below last week's "all-time" record high since Freddie began tracking these products in January 2005.

The Fed meets next week to consider how to change monetary policy, if at all. For a number of weeks after the May FOMC meeting, the message from the Fed suggested that the central bank would skip raising rates at the June meeting and perhaps might pause for a longer period to consider the effects of prior rate hikes and banking stresses that became evident this spring. At the time, the sentiment was that the Fed would be more "data dependent", letting the flow of the economy dictate whether rates should be increased or not.

Since then, there has been little evidence that banking issues have stressed the wider economy, although it may take some months for this to be fully realized. That said, economic growth continues along, labor markets have yet to loosen meaningfully, and inflation remains as stubbornly high as ever, all providing reasons for the Fed to lift rates again if it should decide to do so.

To the mix of stronger economic and inflation data -- which alone tends to press interest rates higher -- word is that the Treasury will soon need to issue a considerable amount of new debt to refill the nation's cash coffers. A surge of supply of Treasury bills, notes and bonds also tends to push yields higher, and in turn, it appears as though mortgage rates can be expected to remain firm or even increase a little bit again in the coming few days.

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.