Washington, DC CNN  — 

The only thing consistent about mortgage rates right now is that they are volatile in the wake of mixed economic signals and recent bank failures. Mortgage rates ticked down this week, after climbing for two weeks in a row.

The 30-year fixed-rate mortgage averaged 6.39% in the week ending May 4, down from 6.43% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.27%.

“This week, mortgage rates inched down slightly amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook,” said Sam Khater, Freddie Mac’s chief economist.

“Spring is typically the busiest season for the residential housing market and, despite rates hovering in the mid-6% range, this year is no different,” he said. “Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability.”

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.

Fickle rates

Mortgage rates have been particularly fickle recently, experiencing daily fluctuations due to economic volatility and recent bank failures, said Jiayi Xu, Realtor.com economist.

The Federal Reserve announced a quarter-point rate hike on Wednesday, pushing the federal funds rate to the highest it has been in 16 years. The increase was expected, and in its statement the Fed left open the possibility for an upcoming pause in rate hikes.

“People did talk about pausing, but not so much at this meeting. There’s a sense that we’re much closer to the end of this than to the beginning,” Fed Chair Jerome Powell said during a post-meeting press conference. “If you add up all the tightening that’s going on through various channels, we feel like we’re getting close or maybe even there, but again that is going to be an ongoing assessment.”

The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

Analysts have said that recent bank failures are doing some of the Fed’s work on reducing inflation for it. The move is unlikely to have a big impact on mortgage rates, as the move was already factored in for most investors said Xu.

“The higher rates will continue to slow economic growth toward the target rate of 2%,” she said. “However, as the impacts of earlier rate increases continue to work through the economy and the recent bank failures reveal the impact of higher rates, there is a risk of the US economy entering a recession.”

Slower than usual spring housing market

This time of year is typically very brisk for home selling. But with mortgage rates still elevated and a stubbornly low inventory of homes to buy, the market is much more sluggish than usual.

“In a typical year, we would expect to see the number of homes for sale begin to increase more significantly from this point forward,” said Xu. “However, mortgage rates remain elevated, leading many sellers to report feeling ‘locked in’ by their current low mortgage rate and planning to wait until rates come down before selling, leading to fewer newly listed homes than a year ago.”

One area of the market that is seeing more activity is new construction. Facing limited inventory of existing homes, some buyers are turning to newly built homes.

Mortgage applications decreased slightly last week, according to the Mortgage Bankers Association, with refinance and purchase activity both remaining well below year-ago levels.

“While MBA expects the ongoing uncertainty in the financial markets to keep mortgage rates volatile in the weeks ahead, we still anticipate they will fall, ending the year closer to 5.5%,” said Bob Broeksmit, MBA President and CEO.