Mortgage rates slip for second week: Freddie Mac

Mortgage rates declined for the second consecutive week, even as the benchmark 10-year Treasury spiked on Tuesday during the Federal Open Market Committee meeting.

The Fannie Mae Primary Mortgage Market Survey found the average for the 30-year fixed rate loan at 6.69% on June 15, down from 6.71% for the prior week. For the same week in 2022, it was 5.78%.

"Mortgage rates decreased slightly this week in anticipation of the pause in rate hikes by the Federal Reserve," said Sam Khater, Freddie Mac's chief economist, in a press release. "As inflation continues to decelerate, economic growth is slowing and the tightening cycle of monetary policy is reaching its apex, which means mortgage rates are expected to decrease later this year and into next."

The 15-year FRM increased 3 basis points to 6.1% from 6.07% last week and 129 basis points from 4.81% a year ago.

The l0-year Treasury yield closed on June 8 at 3.71%, but moved up to 3.84% at the end of the day on June 13. After the FOMC meeting, where it decided not to hike short-term rates but left it open for future increases, the 10-year ended the day just under 3.8%.

On Thursday morning, the 10-year drifted further downward to 3.75% as of 11:40 eastern time.

While the consensus view is that the FOMC is likely to hike rates twice more in 2023, Keefe, Bruyette & Woods analyst Bose George predicts just one more hike.

"Mortgage volumes are likely to remain under pressure throughout the rest of 2023 given rates remain in the neighborhood of 7%," said George in a report whose title is a play on Alice Cooper, June FOMC: Hikes Out for Summer...But Not Out Forever! "Additionally, it is unclear how much more capacity needs to be removed from the system, although the exit of Wells Fargo from the correspondent channel has been a meaningful positive."

Diverging from George's viewpoint is investment banker Louis Navellier.

"There are some hawks at the Fed, but there are also a lot of doves," Navellier said in a commentary. "I do not expect the Fed to raise rates further because inflation is decelerating."

Less positive was Orphe Divounguy, senior macroeconomist at Zillow Home Loans.

"Despite a Fed pause in June, [Federal Reserve Chair Jerome] Powell indicated projections for the terminal rate have moved up," Divounguy said in a statement. "While the uncertainty over the impact of monetary policy and the recent bank turmoil kept the Fed off the economic brakes, future rate hikes may still be necessary."

As of noon Thursday, Zillow's rate tracker for the 30-year FRM was at 6.47%, versus 6.61% on the morning of June 8 and an average of 6.52% for the prior week.

"Without further evidence that core non-housing services inflation is easing, mortgage rates are likely to remain elevated," said Divounguy. "But cooling inflation and a general economic slowdown would put downward pressure on long-term interest rates like the 10-year Treasury yield."