Mortgage rates inched back up this week and remain anchored north of 7% as investors focus on the impact of rising headline inflation ahead of next week’s Fed rate decision.
Freddie Mac‘s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 7.18% as of Sept. 14, up from last week’s 7.12%. By contrast, the 30-year fixed-rate mortgage was at 6.02% a year ago at this time.
“The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated,” Sam Khater, Freddie Mac’s chief economist said. “However, potential homebuyers can still benefit during these times of high mortgage rates by shopping around for the best rate quote.”
Indeed, Freddie Mac research suggests homebuyers can potentially save $600-$1,200 annually by applying for mortgages from multiple lenders.
Other indices showed different mortgage rates this week.
HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 7.16% on Tuesday, compared to 7.20% the previous week. At Mortgage News Daily on Wednesday, the 30-year fixed rate for conventional loans was 7.22%, down from 7.33% the previous week.
What to expect from the Federal Open Market Committee meeting next week ?
On Wall Street and in Washington, investors believe that the Federal Reserve is poised to steer the economy toward a soft landing. Even if August’s headline inflation was driven up by energy prices, the core CPI provided more evidence that core inflation is trending down toward pre-pandemic levels, Jiayi Xu, economist at Realtor.com said. Overall, she expects that inflation will continue to move in the right direction as shelter costs have moved down for five consecutive months on a year-over-year basis. Additionally, Realtor.com’s median asking-rents indicate rental prices have been gradually declining.
“Overall, we expect the Fed will maintain its ‘wait-and-see’ approach in its next FOMC meeting and closely monitor future data,” Xu said.
However, some economists also say that the economy is veering toward a contraction, with 10-year yields holding below 3-month yields, Bloomberg reported. On Thursday, the market surpassed the 1980 record to hold that way for the longest consecutive daily stretch since Bloomberg’s records began in 1962.
How are mortgage rates affecting the housing market ?
As many existing homeowners are staying put in today’s elevated mortgage rates environment, the inventory problem persists and puts first-time homebuyers in a difficult position. Indeed, over one-third (34%) of prospective buyers have yet to purchase a home because there are not enough homes for sale in their budget, HousingWire reported on Thursday.
On the buyers’ side, high mortgage rates continue to subdue demand, with mortgage applications in the first full week of September falling to lows last seen in 1996.
Even as housing demand cools this fall, inventory will remain low, Bright MLS Chief Economist Lisa Sturtevant said.
In that context, prospective homebuyers are scrambling to find solutions, she added.
“Some families are buying homes together, with millennials teaming up with their Baby Boomer parents to buy a multigenerational home. Other buyers are looking for opportunities to purchase a home where they rent out part of it to generate additional income.”
Buyers are also pushed to making trade-offs, such as looking for smaller homes and expanding their neighborhood searches.
“MBA expects some of the recent volatility in rates to subside enough that the 30-year fixed rate will fall closer to 6% by the end of the year,” MBA President and CEO Bob Broeksmit said.