What’s happening with mortgage rates?

This past week has been a little interesting with the bond market and so what is happening to interest rates? Mortgage rates look to the future and everyone is waiting to see when the Fed decides to cut interest rates. The issue right now is the Fed is watching the employment reports and inflation reports. So what does that mean to us?

Last Friday we got the jobs report for March – it wasn’t friendly to the bond market. The expectation was for 200,000 new jobs – the actual number reported was 303,000 new jobs. Average hourly earnings were in line with expectations. The issue with the overall report was more new jobs means that the labor market is strong. There are areas that show most of the new jobs were part time and most of the job gains came from those aged 16-19 and 55+.

Wednesday we got the March CPI report. This quickly affected the bond market as the overall inflation rose 0.4% for the month, which was more than the estimates of 0.3%. The core rate that the Fed watches very carefully increased by 0.4%, also higher than the expected 0.3%. Year over year, the core rate remained the same but expectations were for it to decrease from 3.8% to 3.7%.

With the news on the inflation report, mortgage rates jumped roughly a .25%. This was one of the worst days for mortgage rates since October 2022. The reason behind this is investors are expecting fewer rate cuts by the Fed this year. Going into last weeks jobs report, investors were looking for 3 rate cuts this year, but now it’s less than that – maybe 1-2 rate cuts depending on reports in the next couple of months. The Fed futures is now predicting a 23% chance of a rate cut in June, July is at 47%. They are also showing only 2 rate cuts this year.

As long as the Fed doesn’t indicate a rate increase, we should be near the top for interest rates, but you never know! Every report brings a new piece of information that can affect rates – up or down.

The reality is if you are thinking about buying, it’s still a good time – interest rates have been higher in the past and we still expect at some point to see them drop down. What we don’t know is when. The other reality is most people do not expect home prices to drop, meaning you are better off buying now and refinancing when the rates do come down. When rates start to drop more, more people will enter the housing market and that will increase home prices due to the number of people making offers.

As I have said many times, I wish I had a crystal ball to know exactly where rates will be but my crystal ball is a little foggy these days! And if I truly knew the answer to interest rates, I would probably be sitting on a beach somewhere!!

Leslie Vanderwerf,  NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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