May Mortgage Rates to Stay Above 7% as Hope Dims for Fed Cuts
This article was first published on NerdWallet.com.
May mortgage rate forecast
Mortgage rates will probably remain above 7% in May as inflation resists the Federal Reserve's efforts to bring it under control. It left rates unchanged at the conclusion of its April 30-May 1 meeting, and seemed as frustrated by inflation and high interest rates as home buyers are.
The Fed is trying to wrestle the inflation rate down to 2%. The central bank made progress toward that goal in the last half of 2023, and investors rang in the new year with hopes of a Fed rate cut by spring. But the inflation rate sprang a surprise: It hardly budged in the first three months of the year. Investors have convinced themselves that inflation will stick around for a while. Mortgage rates have moved higher as a consequence.
The 30-year mortgage leapt more than a quarter of a percentage point in April. Mortgage rates are unlikely to fall significantly until inflation wanes and the Fed signals that it's getting ready to announce a rate cut. It's unlikely that we’ll see such a turnaround by Memorial Day.
Inflation loses downward momentum
The outlook was sunnier just a few months ago. As 2023 turned to 2024, it looked as if inflation was waning in earnest. The...