Mortgage rates fell this week, suggesting that the market isn’t too concerned about inflation just yet.
The 30-year fixed-rate mortgage averaged 3.04% for the week ending April 15, down nine basis points from the previous week, Freddie Mac /zigman2/quotes/202741363/composite FMCC -1.65% reported Thursday .
It’s the second consecutive week in which benchmark mortgage rates declined. Last week was the first time since February that the interest rates on the 30-year home loan moved lower.
The 15-year fixed-rate mortgage dropped seven basis points to an average of 2.35%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.8%, down 12 basis points from the previous week.
The drop in mortgage rates is the result of a combination of factors. To start, market participants appear to be nonplussed for the time being by the state of inflation. “Continuing a trend from the last couple weeks, if not several months, rates offered a muted response in recent days to economic data releases that normally would likely have a larger impact,” said Matthew Speakman, an economist with Zillow /zigman2/quotes/204413973/composite Z +1.57% /zigman2/quotes/205077794/composite ZG +0.83% .
The consumer and producer price indexes released for March both displayed stronger-than-expected inflation, Speakman said. Typically, when inflation moves higher, the value of bonds falls. Bond yields move in the opposite direction from their value. Historically, mortgage rates have tracked the direction of long-term bond yields including the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.81% .
“The muted reaction to this week’s reports indicated that the market views the price pressures as transitory — that is, as a temporary occurrence due to weak prices a year ago — rather than a signal of runaway price growth,” Speakman said.
Another factor that is likely contributing to the recent decline in interest rates is complications with the roll-out of COVID-19 vaccines in the U.S. This week, regulators ordered states to pause their distribution of the vaccine produced by Johnson & Johnson /zigman2/quotes/201724570/composite JNJ -1.27% over concerns about a handful of cases where patients developed blood clots after receiving their shots.
That “introduced fresh uncertainty to the market,” Speakman noted, particularly as COVID-19 cases across the country remain high.
Nevertheless, rates are not necessarily expected to continue falling or stay low for much longer. “The break could be temporary with the upward trend resuming as the outlook for the economy brightens,” said Danielle Hale, chief economist at Realtor.com.
The good news for buyers who are worried about the rising cost of buying a home is that other trends are also working in their favor. New data from Realtor.com shows that new home listings are on the rise. “This won’t solve the inventory crunch over night, but it’s a big step in the right direction, and one we’re likely to see more of in the weeks ahead as we approach the best time of the year to sell a home,” Hale said.