Inflation is cooling, the Federal Reserve is taking a breather — for now, at least — and mortgage rates are holding steady. The average interest rate on 30-year mortgages remained at 6.84 percent, unchanged from last week, according to Bankrate’s national survey of large lenders.

The lack of movement comes as the official inflation number fell to 4 percent for May, and as the Fed decided to hit the pause button after raising rates at 10 consecutive meetings in 2022 and 2023. Mortgage rates remain chained to inflation, says Greg McBride, Bankrate’s chief financial analyst.

“Until core inflation moves materially lower, mortgage rates are unlikely to move materially lower,” McBride says.

The Fed has been acting aggressively to control inflation. While its policy guides the mortgage market, the Fed doesn’t directly set fixed mortgage rates. The most relevant benchmark is the 10-year Treasury yield, which has bounced around in recent weeks.

Mortgage rates rose steeply for most of 2022, topping 7 percent in November before retreating. 

What happened to mortgage rates this week

The 30-year fixed mortgages in this week’s survey had an average total of 0.4 discount and origination points.

Over the past 52 weeks, the benchmark 30-year fixed-rate mortgage has averaged 6.48 percent. A year ago, the 30-year fixed-rate mortgage was 5.85 percent. Four weeks ago, the rate was 6.9 percent. The 30-year fixed-rate average for this week is 1.29 percentage points higher than the 52-week low of 5.55 percent.

As for other loans:

• The 15-year fixed-rate mortgage was 6.24 percent, up from 6.2 percent last week.
• The 5/6 adjustable-rate mortgage (ARM) stood at 6.67 percent, unchanged compared to a week ago.
• The 30-year fixed-rate jumbo mortgage was 6.66 percent, up from 6.64 percent last week.

How mortgage rates affect home affordability

The national median family income for 2023 is $96,300, according to the U.S. Department of Housing and Urban Development, and the median price of an existing home sold in April 2023 was $388,800, according to the National Association of Realtors. Based on a 20 percent down payment and a mortgage rate of 6.84 percent, the monthly payment of $2,036 amounts to 25 percent of the typical family’s monthly income.

A year ago, median family income was $90,000, the median home price was $395,500 and the average mortgage rate was 4.95 percent. Buying the typical home then required 23 percent of a family’s monthly income.

Where mortgage rates are headed

Experts expected to see rates decrease by the end of 2023 as the Fed’s round of rate hikes draws to an end, but the resilience of the U.S. economy is throwing a wrinkle into those expectations. The job market remains strong, and the U.S. economy has yet to fall into recession. Now, though, opinions are mixed about what the Fed will do at its July 26 meeting.

Lisa Sturtevant, chief economist at Bright MLS, a large real estate listing service in the Mid-Atlantic, thinks the Fed will resume rate hakes. “The expectation is for the Fed to resume rate hikes at its July meeting,” she says. “Inflation, though down significantly from a year ago, is still higher than the Fed’s 2 percent target.”

“Inflation is coming down, but slowly. Multiple indicators suggest the economy here and abroad will slow significantly in the near term, but the job market continues to appear resilient in the most recent data,” he says. “With this muddled picture, it is not surprising that the FOMC held rates steady at its June meeting – but kept their options open for July and later this year. Nevertheless, we expect that the Fed is at the top of its rate hiking cycle.”

Methodology

The Bankrate.com national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison. Our rates differ from other national surveys, in particular Freddie Mac’s weekly published rates. Each week Freddie Mac surveys lenders on the rates and points based on first-lien prime conventional conforming home purchase mortgages with a loan-to-value of 80 percent. “Lenders surveyed each week are a mix of lender types — thrifts, credit unions, commercial banks and mortgage lending companies — is roughly proportional to the level of mortgage business that each type commands nationwide,” according to Freddie Mac.