Key facts
- Mortgage rates have slightly decreased following confirmation of a U.S.-Iran peace deal.
- The Federal Reserve is expected to hold interest rates steady due to current inflation levels.
- Inflation stands at a 4.2% annual rate, diminishing hopes for an immediate rate cut.
- Homeownership demand remains strong, with pending sales and mortgage applications increasing.
- Existing home sales saw their largest monthly gain of the year in May.
Mortgage rates have seen a slight decline as a U.S.-Iran peace deal is set to be signed, potentially easing concerns over oil supply shocks and inflation. However, persistent inflation at a 4.2% annual clip suggests the Federal Reserve will likely hold benchmark interest rates steady at its upcoming meeting, with some traders anticipating a rate hike later in the year.
Despite affordability challenges, the housing market shows resilience. Homeownership demand is growing, evidenced by an increase in pending home sales and mortgage applications. Existing home sales recorded their largest monthly gain of the year in May, indicating that pent-up demand is beginning to materialize. Experts suggest that while lower rates are desirable, homebuyers are increasingly focused on gaining confidence in the path of inflation and the broader economy before making major financial decisions.
On Tuesday, average rates for 30-year conforming mortgages stood at 6.73%, down 5 basis points from the previous week. Jumbo loan rates and FHA-backed loans also saw modest decreases. The Federal Reserve, under new leadership, is expected to maintain the federal funds rate between 3.5% and 3.75%. The May jobs report, which showed better-than-expected job growth and a steady unemployment rate, further supports the likelihood of sustained higher interest rates.