Mortgage Rates Climb Past 6.75% Amid Inflation Worries

Mortgage rates resumed their upward trajectory this week, with 30-year conforming loans averaging 6.77% as of Tuesday, a 4 basis point increase from the previous week. This marks a reversal from last week's modest decline, which had briefly boosted borrower interest and home purchase demand. Rates for 30-year jumbo loans rose 9 basis points to 6.75%, and FHA-backed loans increased by 6 basis points to 6.35%.

Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), noted that last week's rate dip supported buyer interest, with demand exceeding last year's levels. He also indicated that improving housing inventory and moderating home price growth in many regions are contributing to a more balanced market, potentially bolstering housing activity through the summer.

Concerns about persistent inflation are a key driver of the current rate environment, with hawkish statements from the Federal Reserve influencing borrowing costs. The Federal Reserve Bank of New York's June Survey of Consumer Expectations, based on responses from approximately 1,300 households, indicated that consumers anticipate inflation trends to continue in the short and medium term. The survey reported that median inflation expectations for one year from now rose to 3.7% in June, up from 3.5% in May and reaching its highest point since September 2023.

This sentiment aligns with recent economic data, as the Consumer Price Index (CPI) in May climbed to an annual rate of 4.2%, the fastest growth seen since April 2023. However, the New York Fed's survey also revealed a slight decrease in median home price growth expectations, dropping to 3.2% annually from 3.5% in May, which is marginally above the 12-month trailing average of 3.1%. The upcoming June CPI figures are scheduled for release on July 14.