Mortgage Rates Are at Their Lowest in Months – Will It Last?
Best Rate in Months
In response to the Fed’s monetary tightening that began in March of this year, mortgage rates have trended upward. A reversal of that trajectory was evident this week as the average interest charge on a 30-year fixed-rate mortgage hit 4.99%, the lowest since April.
For prospective homebuyers who saw rates as high as 5.81% in June, a 13-year high, the news may provide welcome relief. Such a reduction translates to a monthly bill that’s hundreds of dollars lower.
Why the Decline?
In response to the highest inflation in the US in 40 years, the Fed enacted a series of interest rate increases designed to cool off the economy. Their action has driven up the cost of borrowing, including housing loans. At the beginning of 2022, 30-year mortgages were going for about 3%, almost half of the June high.
Now, the central bank’s initiatives appear to be taking effect. Economic growth has slowed over the last two quarters, further stoking recession concerns. The current drop in mortgage rates reflects the expectation that growth will continue to trend downward.
As with everything in the world of finance, these forecasts are subject to change. It’s difficult to predict where the economic seesaw will level out as the Fed attempts to dampen inflation without slowing growth too much. For this reason, some market observers predict mortgage rates will be bumpy and the rate changes may happen fast.
Amid the uncertainty, prospective homebuyers will need to buckle their seatbelts as they navigate volatile interest rates, low housing stock, and stubbornly high home prices.
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