Home purchase demand holds up even with mortgage rates at 6.7%

Rates for 30-year conforming mortgages stayed above 6.7% this week, but housing market activity has been resilient as weekly pending sales and purchase loan demand are up slightly compared to this time last year.

At HousingWire’s Mortgage Rates Center on Tuesday, 30-year conforming loan rates averaged 6.71%, while rates for 30-year jumbo loans averaged 6.73% and rates for 30-year loans backed by the Federal Housing Administration (FHA) were at 6.29%.

Purchase climate warms even as refis cool

Kyle Bass, production business manager at Refi.com — an affiliate of Veterans United Home Loans — said last week after Freddie Mac rates rose that consumers are showing extra sensitivity to small rate moves. This is having “an outsized impact on refinance activity,” he said, pointing to weekly application data from the Mortgage Bankers Association (MBA).

“That sensitivity appears to be tied not just to affordability, but also to growing uncertainty around timing and whether refinancing will ultimately be worth it,” Bass said.

“A recent Veterans United refinance sentiment study found that 37% of refinance prospects experience stress or anxiety about making the wrong refinancing decision, while 29% say they’re confused by closing costs, points and lender credits,” he added. “Another 23% reported difficulty timing the market correctly. Those findings help explain why many homeowners remain hesitant, especially when rates aren’t showing many signs of improvement in the near future.”

Mat Ishbia, president and CEO of United Wholesale Mortgage (UWM), said this week that he’s bullish on the current status of the purchase market as home price growth, inventory growth and Federal Reserve interest rate projections are in a healthy place.

“I actually think it’s an LO market, a loan officer market, because it’s hot right now,” Ishbia said in a monthly video post. “Don’t get confused — it’s a purchase market right now.”

Case-Shiller home price data for March showed that prices rose 0.7% on an annualized basis, down from 0.8% in February. And price growth has slipped into negative territory in several major metros — including Seattle, Denver, Dallas, Phoenix and Las Vegas.

“Buyers are rejecting current price tags, but sellers refuse to offer steep discounts. The result is in a standoff,” said Thom Malone, principal economist at Cotality.

“Monthly price growth in March was the slowest since 2019. Sales were also low, indicating that sellers are still waiting for the rest of the economy to catch up with the housing market. Still, the modest appreciation points away from any immediate price drops and signals that buyers might be the ones who end up giving the most ground.”

What will the Fed do next?

Benchmark interest rates, which don’t directly impact rates for home loans, aren’t likely to move in the short term. The CME Group’s FedWatch tool shows that 98% of interest rate traders believe the federal funds rate will remain untouched after the next Federal Open Market Committee meeting concludes June 17.

That meeting will be Kevin Warsh’s first as Fed chair after he was recently confirmed by the Senate. Outgoing chair Jerome Powell, who was frequently criticized by President Donald Trump for not lowering rates quickly enough, remains on the Fed board. While Warsh has been described as less hawkish than Powell, there’s little evidence to suggest he’ll sway other officials into lowering rates anytime soon.

According to the CME Group’s survey, benchmark rates (currently at a range of 3.5% to 3.75%) are more likely to move higher than lower by the end of 2026. Interest rate traders placed 92% odds on no change in July, 75% odds of no change in September and 40% odds of a 25 basis-point increase by December.

Bose George, an analyst for Keefe, Bruyette & Woods (KBW), said in a note to investors last week that mortgage spreads are likely to remain beneficial for the near future. He wrote that Fannie Mae and Freddie Mac continue to purchase mortgage-backed securities, but the combined $317 billion value of their retained portfolios shows “meaningful room” for growth based on their $500 billion statutory cap.

“The spread between primary mortgage rates and the 10yr UST is now 208 bp, modestly above the long-run average of 192 bp,” George wrote. “Both spreads are also fairly close to the post-GFC averages. … So we think further spread tightening is likely limited (as is further downside to mortgage rates unless the 10-yr UST declines).”

Inflation is top of mind

At an economic conference in Iceland last week, Fed officials Michelle Bowman and Jeffrey Schmid offered public remarks on monetary policy influences.

“One straightforward case that would call for raising the policy rate reflects elevated inflation that is likely to continue to move higher, with the labor market showing no sign of slack and GDP rising much faster than its potential,” Bowman said. “The question would be by how much and how quickly to increase the policy rate. If the existing monetary policy stance is accommodative or close to neutral, in my view, it would be appropriate to withdraw any remaining accommodation by raising the policy rate deliberately or even expeditiously.”

“With inflation running above the Fed’s 2% definition of price stability for over five years, now is not the time to let down our guard,” Schmid added. “We must continue to signal our commitment to price stability and our willingness to take the actions necessary to achieve our mandate.”