Mortgage rates rose sharply in the week ending July 3, with the average rate on a 30-year fixed-rate loan again exceeding 7%.
The average APR on a 30-year fixed-rate mortgage was 7.01%, up 20 basis points from the previous week's average, according to rates provided to NerdWallet by Zillow. One basis point is one-one-hundredth of a percentage point.
Rising interest rates, economic decline
In fact, mortgage rates probably should have fallen this week, and not just because people are more interested in hot dogs and fireworks than buying and selling homes.
Economic data released this week was unspectacular, but it suggests the economy is cooling. Consumer prices, the Federal Reserve's preferred inflation measure, were roughly flat from the previous month. Construction spending fell for the first time in 18 months, beating market expectations. Employment remains strong, but earlier figures were revised downward, suggesting the labor market may be stabilizing.
The Federal Reserve Doesn't Care
Taken together, these numbers suggest the Fed's strategy of raising interest rates and then keeping them high is working. The Fed wants to slow inflation by making borrowing more expensive. The declines in hiring and construction are in line with that goal, but in remarks on Tuesday, Fed Chairman Jerome Powell stressed caution.
Speaking at an economics conference in Portugal, Chairman Powell acknowledged the strength of the recent numbers but urged caution. “What we'd like to see is more of the data that we've seen recently,” he said. He declined to say when the Fed might cut rates but said, “We are well aware that if we cut rates too soon, we could undo some of the good work that's been done.”
The Fed is likely to cut rates by only 0.25 percentage points this fall — just a little more than the 30-year Treasury yield moved this week — but a move toward lower rates could still ease upward pressure on mortgage rates.
This article, “Weekly Mortgage Rates Rise Despite Easing Economic Conditions,” originally appeared on NerdWallet.