Mortgage Rates Remain Elevated After Fed Meeting

This week's mortgage rates remained steady, and stayed in the range of high-6% for a fixed-term 30-year loan. The adjustable mortgage rate ticked slightly higher, while the fixed mortgage rate decreased or remained about the same.

As of May 4, here are the current mortgage interest rates without discount points, unless otherwise stated:

VA Purchase Loans: 6.17% plus 0.04 points (up from a week earlier, when it was 6.12%).

The Freddie Mac 30-year fixed rate mortgage has dropped this week due to recent bank failures and economic volatility. The Federal Reserve Bank, at its FOMC meeting in May, announced a 25 basis point increase to the interest rate. This will bring the fed funds rate up to between 5% and 5.25%. It is the highest rate since 2007. The Fed's decision had been anticipated and is unlikely to have a significant impact on mortgage rates or other interest rate changes."

• Realtor.com's economist Jiayi Xu in a statement on May 4,

Mortgage rates are not expected to increase despite the fact that the Federal Open Market Committee raised the federal funds rate another 25 basis points in the last week. Mortgage rates will likely remain unchanged for the time being, as banks and lenders have already priced in a further Fed rate increase.

In the FOMC statement, Fed officials have made some important phrasing modifications. Policymakers have written in previous statements that they "anticipate that some additional policy tightening may be appropriate." The current statement states that the FOMC is monitoring incoming data to determine the extent of additional policy firming.

"That's an important change, that we no longer say that we anticipate'," said Fed Chair Jerome Powell at a press conference. "So, we'll be guided by the incoming data at each meeting."

The new language implies that the central banks may not increase rates this year. This puts the terminal rate at between 5% to 5.25%. The Fed could decide to lower rates in the future depending on how the economy adapts to the higher rates. With the possibility of an upcoming recession and uncertainty within the banking sector, they may also make a decision based on the way the economy reacts. Officials are being more secretive than usual at the moment about future policy.

A recession in the U.S. would not be good for the economy, but there is a silver lining. Mortgage rates will start to drop. Most economists believe that the 30-year mortgage rate will drop below 6% at the end of this year due to the expected economic slowdown.

Indicator of The Week: A Drowsy Housing Market in Spring

This spring's housing market is eerily quiet. Normally, for-sale signposts are dotted around the country with daffodils, tulips and other spring flowers. It's easy to assume that the gloomy market is due to homebuyers waiting for rates to drop. But that's not always true. The problem comes more from the supply, as sellers are unable to adjust to the current rate climate.

Sam Khater is Freddie Mac's Chief Economist. "Interested homebuyers have adapted to the current rate environment. However, the lack of available inventory continues to be a major obstacle to affordability."

According to a report by Realtor.com, the number of new listings was down 21.3% this year when compared to last April. Due to a tighter inventory, the days between listing a property and its pending sale have decreased in recent months. This is down from 74 days in January to just 49 days in April. However, homes are still moving much slower than they did last April when the median number of days was only 32. The listing price of homes has also begun to rise.

"We would expect the number of houses for sale to start increasing more dramatically from this point onward," says Xu. However, mortgage rates are still high, causing many sellers to feel "locked in" by their low mortgage rate, and plan to wait until rates drop before selling. This has led to fewer new listings than last year.

Homebuyers are increasingly looking to purchase new constructions due to the lack of available homes. Realtor.com data indicates that new home sales increased 9.6% from February to March. Many homebuilders offer incentives such as mortgage rate buydowns, which can offset the price of new homes.

It will take time to see if the housing market will warm up as a result of lower mortgage rates.

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