The government’s unusually high-profile Producer Price Index (PPI) inflation reading early Wednesday pushed bond yields higher and mortgage rates to follow suit. Interest rates had already spiked earlier this week on news of further difficulties in negotiations over the Iran war.
The average interest rate on the popular 30-year fixed 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 the decline in interest rates reversed with the start of the war.
Wednesday’s rise was much smaller than the rise after another inflation report, the consumer price index, released on Tuesday.
“PPI is generally not as big of a deal as CPI,” explained Matthew Graham, chief operating officer of Mortgage News Daily. “We also assume that bond prices will decline in an adjustment manner after the war ends.”
The move comes just as the spring market, which stalled in March, is finally starting to show new life. The National Association of Realtors recorded an 8% increase in home listings in April compared to the same month last year, according to data from SentryLock, which provides lockboxes that real estate agents use to mark properties for sale. All four regions of the country saw increases.
Some of the new demand is being driven by cooling home prices. Nationally, it’s still higher than a year ago, but not by much. And then there is the supply.
“Inventory hasn’t recovered yet. It’s still 11-12% below where it should be,” said Andy Walden, head of mortgage and housing market research at mortgage technology company ICE.
Walden also cited the recent rise in interest rates, saying they are up about 40 basis points compared to February. However, mortgage interest rates at this time last year were close to 7%.
“If you look at what this means for market power purchases, it’s down about 4% compared to February,” he said. “It’s more affordable than last year, but not as affordable as it was earlier this year.”
