Mortgage Rates Show Mixed Movement in the Last Week
Over the past week, there have been notable shifts in mortgage rates. According to recent data, the average interest rates for both 15-year fixed and 30-year fixed mortgages have decreased, while rates for 5/1 adjustable-rate mortgages have increased.
The movement in mortgage rates is directly correlated to the rise in inflation throughout 2022. To combat the surging inflation, the Federal Reserve has been steadily increasing its federal funds rate. By raising interest rates, the central bank aims to reduce prices by limiting consumer spending.
Despite raising interest rates 10 times since March 2022, the Federal Reserve paused its rate hikes at its June meeting. Currently, the federal funds rate stands at a range of 5.00% to 5.25%. However, the possibility of future rate increases has not been ruled out, and the Fed will make a decision on whether or not to raise rates at its next meeting on July 26.
In terms of mortgage rates, it is important to note that they are not directly set by the Federal Reserve but are influenced by its actions. Mortgage rates fluctuate on a daily basis in response to various economic factors such as inflation, employment, and the overall state of the economy.
While the recent decrease in inflation is positive news for mortgage rates, the potential for future rate hikes by the central bank this year may keep rates high. Jacob Channel, senior economist at loan marketplace LendingTree, predicts that mortgage rates will hover around the current range of 6% to 7%.
Despite the uncertainty surrounding mortgage rates, potential homebuyers should focus on factors within their control, such as improving their credit score and saving for a down payment. Additionally, comparing rates and fees from multiple lenders can help secure the best deal. Looking at the annual percentage rate (APR) provides a comprehensive understanding of the total cost of borrowing.
30-year fixed-rate mortgages currently carry an average rate of 7.14%, a decrease of 17 basis points from the previous week. On the other hand, the average rate for a 15-year fixed mortgage sits at 6.46%, a decline of 13 basis points. For those opting for a 5/1 adjustable-rate mortgage, the average rate stands at 6.21%, an increase of 4 basis points.
While mortgage rates were historically low in 2020 and 2021, they have steadily increased throughout 2022. This has resulted in decreased demand from potential buyers and a slight ease in home prices in certain regions. However, Daniel Oney, research director at the Texas Real Estate Research Center at Texas A&M University, acknowledges that it has been challenging for buyers to adapt to the rapid rate increase.
It is important to note that mortgage rates are not directly tied to the federal funds rate, as is the case with other financial products. As long as inflation continues to trend downward, mortgage rates are expected to experience slight declines towards the end of 2023. The most recent housing forecast from Fannie Mae predicts an average 30-year fixed mortgage rate of around 6.3% by the end of the year.
While mortgage interest rates are subject to daily fluctuations, personalized rates can be obtained through local mortgage brokers or online calculators. When choosing a mortgage, factors such as down payment, credit score, loan-to-value ratio, and debt-to-income ratio should be considered. Shopping around and comparing rates from various lenders is essential in finding the best mortgage loan.