Mortgage Rates Today, June 3, 2024: Wild Ride Coming

Today’s Market

One-Liner

The outlook for mortgage rates has lightened since last week as signs of a slowing economy grow. But important data and a key Federal Reserve meeting over the next nine days could change everything.

What’s Driving Mortgage Rates?

Amid many ups and downs, mortgage rates have been moving sideways for the last month or so. But that could be transformed by highly consequential data due Friday and next Wednesday. And, also next Wednesday, the Fed is scheduled to update us on its thinking about future cuts to general interest rates. Altogether, we could be in for a rocky ride over the next nine days.

What to Watch Out For This Week

We might see some movement in mortgage rates before Friday’s hugely important jobs report for May, formally called the employment situation report.

Markets seem especially sensitive to fresh data at the moment. So, even reports that typically affect mortgage rates in only a limited and temporary way are sometimes having a bigger impact than usual.

But it’s Friday’s jobs report that’s likely to overshadow everything else this week. Markets are expecting mildly bad news for the economy, which tends to be good news for mortgage rates.

But, for years, the jobs report forecasts – on which market expectations are based – have frequently been wildly wrong. The track record improved for the latest one, however. And that can set up considerable volatility for mortgage rates. So, buckle up on Friday, June 7.

Further Ahead

Next Wednesday, Jun. 12, could prove even more exciting for mortgage rates than Friday, June 7. The consumer price index (CPI), typically the most crucial of all inflation reports, will be released first thing that morning.

In April, “core” CPI – which strips out volatile food and energy prices – rose 3.6% over the previous 12 months. That’s still high, considering the Fed wants that number closer to 2%. We want to see a number below the forecasted 3.5%-3.6%, on June 12, when May core CPI is released.

Then, just hours after CPI, the Fed’s rate-setting body (the Federal Open Market Committee or FOMC) will issue a report and data and host a news conference.

Technically, the FOMC could announce a cut in general interest rates that day. But just 0.1% of investors expect that, while 99.9% reckon those rates will hold steady, according to the CME FedWatch tool.

So, if it’s not a cut that people are anticipating, why the excitement? Well, we’ll know a lot more about the Fed’s current thinking about future cuts that afternoon than we currently do. Oh, and it’s partly because the Fed will be publishing one of its quarterly “dot plots.”

“The Fed dot plot is a chart that shows you where each FOMC member thinks interest rates will be by the end of the current year, two or three (depending on the time of year) consecutive years after, and the more ambiguous “longer run.” Each “dot” represents a member’s individual view.” — Britannica

If next Wednesday, the Fed is optimistic about the chances of cuts to general interest rates later in the year, that could be very good for mortgage rates. But, if it plays down that likelihood, those rates might rise.

Forecasts

Expert economists who specialize in forecasting mortgage rates are divided in their predictions. Vanishingly few think average rates for 30-year, fixed-rate mortgages will dip below 6% this year. And some, including Fannie Mae, expect them to be at or over 7% at the end of 2024.

But others are a little more optimistic. For example, the Mortgage Bankers Association is forecasting 6.5% for the last quarter.

So, don’t expect significant falls. But there is a possibility of some gentle ones.