The government’s producer price index (PPI), an exceptionally hot gauge of inflation early Wednesday, sent bond yields higher, and mortgage rates followed. Interest rates had already skyrocketed earlier this week following news that there would be further difficulties in negotiations over the Iran war.
The average interest rate on the popular 30-year fixed-rate mortgage rose to 6.57% on Wednesday, according to Mortgage News Daily. It is now 15 basis points higher than last Friday and is at its highest level since March, when falling interest rates reversed due to the outbreak of war.
Wednesday’s increase was much smaller than the increase following another inflation report: the consumer price index released on Tuesday.
“PPI is generally not as big a deal as CPI,” said Matthew Graham, chief operating officer at Mortgage News Daily. “A corrective decline is also expected for bonds after the end of the war.”
The move comes just as the spring market, which stalled in March, is finally coming to life. The National Association of Realtors said data from Sentrilock, which provides the lockboxes that real estate agents use on properties listed for sale, rose 8% in April compared to a year ago. All four regions of the country recorded increases.
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Some of the new demand is due to a slowdown in property prices. They are still higher nationally than a year ago, but not by much. And then there is supplies.
“Inventories haven’t recovered yet, we’re still 11-12% below where we should be,” said Andy Walden, head of mortgage and real estate market research at ICE, a mortgage technology company.
Walden also pointed to the recent rise in interest rates, which is about 40 basis points higher than in February. However, at this time last year, mortgage rates were closer to 7%.
“If you look at what that means for purchasing electricity in the market, it’s down about 4% compared to February,” he said. “We are more affordable than last year, but not as affordable as we were at the beginning of the year.”
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