Today's Mortgage Rates - 02/08/2023

A somewhat less-hawkish tone from the Fed this week has helped mortgage rate to decline a bit, with the prospect for a somewhat larger decline on tap.

As reported by Freddie Mac today, the average offered interest rate for a conforming 30-year fixed-rate mortgage declined by another four basis points (0.04%), slipping to 6.09% and holding at about a four month low.

The average offered rate for a conforming fifteen-year FRM declined by a little less than its longer-term counterpart, easing by just three basis points (0.03%) to settle at 5.14% for the week.

Freddie Mac's legacy rate survey showed the average initial fixed rate for a hybrid 5/1 ARM at 5.42%, a five-basis-point (0.05%) decrease from last week. Even with fixed-rate mortgages easing over the past couple of months, a 5/1 ARM might offer a reasonable alternative to some homebuyers looking for a less-costly mortgage option right now.

The Federal Reserve met this week and decided to lift the federal funds rate by another quarter of a percentage point. The new range for the key monetary policy rate is 4.5% to 4.75%, the highest it has been since October 2007.

Despite the increase, financial markets were encouraged that the Fed is getting closer to completing its cycle of increasing rates to combat 40-year high inflation. In his post-meeting press conference, Fed Chair Powell noted that it is reasonable to think that "the disinflationary process has begun" but also that the job of returning core PCE back to a 2% level is "not yet fully done."

The Fed continues to signal that at least one and possibly two hikes will come before the policy rate is at a sufficiently restrictive level. Financial markets appear to be convinced that inflation is set to start to cool more rapidly, or that a recession may come at some point later this year; the Fed does not think so in either case, pointing to a lack of meaningful decline in service-price inflation and plenty of signs of a still-expanding economy, such as a tight labor market.

It's never clear which side will turn out to be right, at least until time passes and the actual economic data and inflation figures are posted and evaluated. Until then, all we can do is watch and consider the changes as they come along.

Near term, the initial reaction to the Fed's statements and move on Wednesday was a rally in bonds, driving yields down a little bit more, setting the stage for lower mortgage rates in the coming few days at least.

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.