Mortgage rates are expected to remain relatively stable in the first week and a half of June, but there is uncertainty surrounding their movement starting June 12th.
Several factors influence mortgage rates, with two significant ones being the monthly consumer price index and Federal Reserve monetary policy committee meetings. Both of these events are scheduled for June 12th, creating a unique situation on the calendar.
The consumer price index (CPI), which measures inflation, can impact mortgage rates on its own. Higher-than-expected inflation could lead to higher rates, while lower inflation might cause rates to decrease. Decisions made at the Fed meeting can also influence rates. Normally, markets have time to react to these events separately, but in June, there will only be five and a half hours between the CPI release and the Fed’s announcements.
The day will start with the release of May’s CPI at 8:30 a.m. Eastern time, followed by the Fed’s monetary policy statement, updated economic projections, and a news conference by Fed Chair Jerome Powell in the afternoon. This series of events could cause significant volatility in mortgage rates, depending on any surprises from the CPI or the Fed.
A lot of uncertainty
Mortgage rates are influenced by investors’ perceptions of the economy, which can be reset by unexpected economic reports. Inflation indicators like the CPI have the power to impact rates, as does the Fed’s economic projections and policy decisions.
If there are surprising developments on June 12th, mortgage rates could experience a sharp shift. Alternatively, if everything unfolds as expected, rates may remain relatively stable. The outcome will only be known after Powell’s news conference.
Word of the month: ‘volatility’
As of the end of May, the Cleveland Fed forecasted that core consumer prices would rise about 3.6% in May, leading to mortgage rates between 7% and 7.25%. These rates are likely to hold until June 11th, awaiting the CPI report on the 12th.
Depending on the core CPI in the report, mortgage rates could rise or fall. The Fed’s announcements later in the day could amplify or negate the CPI’s impact. The events of June 12th could set the trajectory for mortgage rates in the following weeks.
“Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable, and more predictable inflation,” said Zillow’s senior economist, Orphe Divounguy.
If you’re unsure whether to float or lock in a mortgage rate, consult your loan officer for updated information.
What other forecasters predict
Fannie Mae and the Mortgage Bankers Association have adjusted their mortgage rate forecasts upward due to persistent inflation. Fannie Mae’s forecast is less optimistic than the MBA’s.
What happened in May
In May, the average rate on the 30-year fixed-rate mortgage was 7.01%, slightly lower than April’s average. Rates fluctuated above 7.25% at the start of the month, dipped below 7%, and then rose again above 7% towards the end of May.
The article June Mortgage Rates: Calm at Takeoff, Then Subject to Turbulence originally appeared on NerdWallet.
