The average 30-year fixed mortgage rate rose to 7.13% on Wednesday (Feb. 14) after the government reported that inflation edged higher than the Fed and consumers hoped—spooking homebuyers.
Mortgage rates had just begun to edge down from record highs at the end of last year and continued to fall at the beginning of 2024. But then they picked up again in mid-January and kept rising higher after Fed chair Jerome Powell signaled in an interview on 60 Minutes that interest rate cuts aren’t coming anytime soon.
Analysts have expected the Fed to cut interest rates around June, but Tuesday’s worse-than-expected inflation data could push that date further back. That’s usually bad news for homebuyers since mortgage rates typically mirror the federal funds rate.
But Greg Schwartz, the CEO of Tomo—a mortgage lender that uses consumer metrics like jobs, how much people are spending and saving, and how much income is being spent on interest payments to predict future mortgage rates—thinks the hoopla about recent rate increases is overblown. Schwartz expects rates to come down to around 6.4% by this summer.
“Financial markets react suddenly and drastically to individual data points. It’s important to take a mid-to-long view and not index on short term moves,” he told Quartz.
Shwartz believes mortgage rates will come down mostly because he thinks the Fed will still cut interest rates this summer. “In order to engineer a ‘soft landing’ the Fed will need to bring interest rates down from these high and restrictive levels before the economy tips into a recession.”
That change will pique the interest of a lot of homebuyers who’ve been waiting for their golden opportunity to get into the market, as demand has been pent up over the last year.