Mortgage rates are once again climbing, now consistently exceeding 7%, with investors keenly observing the ramifications of the escalating inflation, all eyes are on the Federal Reserve’s upcoming decision regarding interest rates next week. The latest data from Freddie Mac’s Primary Mortgage Market Survey — which specializes in analyzing standard loans with a 20% down payment — revealed that as of September 14, the average rate for a 30-year fixed mortgage was 7.18%, a slight increase from 7.12% recorded the previous week. This presents a notable difference from the 6.02% rate seen during the same period last year.
Freddie Mac’s chief economist, Sam Khater, commented that the revived pace of inflation coupled with a vigorous economy is sustaining the high mortgage rates. He suggested, however, that prospective homebuyers have the opportunity to capitalize during this period by seeking out the most favorable rate quotations. Research from Freddie Mac affirms this strategy, indicating that individuals might save between $600 and $1,200 yearly by soliciting mortgage quotes from several lenders.
Simultaneously, differing figures regarding mortgage rates have emerged this week from other platforms. For instance, HousingWire documented a marginal decrease in Optimal Blue’s 30-year fixed rate for standard loans to 7.16% on Tuesday, as opposed to 7.20% the week before. Moreover, Mortgage News Daily registered a decrease to 7.22% from 7.33% within a week on Wednesday.
Forecasts for the Approaching Federal Open Market Committee Session:
In the corridors of Wall Street and the halls of Washington, there is a consensus among investors that the Federal Reserve might guide the economy to a gentle slowdown. Despite the surge in inflation witnessed in August, mainly propelled by rising energy costs, key signs suggest a return of core inflation to levels witnessed before the pandemic, stated Jiayi Xu, an economist at Realtor.com. Xu foresees a continued positive trend in the inflation trajectory, particularly as housing expenses have been on a downward slope for five successive months and rental prices have shown signs of moderating, as per data from Realtor.com.
“We anticipate the Fed to adopt a cautious stance in the upcoming FOMC meeting, keeping a close eye on unfolding data,” asserted Xu. However, a report from Bloomberg brought to light the apprehensions of several economists who are predicting a potential economic downturn, with a notable shift in the yield curves, enduring a record period since 1962.
The Rising Mortgage Rates and Their Influence on the Housing Sector:
The current escalated mortgage rates have dissuaded many homeowners from relocating, further aggravating the housing inventory issue and putting first-time buyers in a challenging position. In fact, HousingWire noted on Thursday that a significant 34% of prospective buyers are delaying their purchase owing to the limited availability of affordable homes.
With the soaring mortgage rates dampening the buying enthusiasm, the initial week of September saw a plunge in mortgage applications, reaching a low point that hasn’t been witnessed since 1996. “Despite the expected decrease in housing demand this autumn, the inventory levels are predicted to remain limited,” stated Lisa Sturtevant, the Chief Economist at Bright MLS.
In this scenario, potential homebuyers are seeking alternative strategies. Sturtevant elaborated, “A new trend is emerging where families are collaboratively purchasing homes, and millennials are joining forces with their Baby Boomer parents to acquire multi-generational residences. Meanwhile, some are considering properties that offer rental spaces as a source of additional income.”
Furthermore, buyers are adapting by considering smaller homes and widening their search areas. Bob Broeksmit, the MBA President and CEO, anticipates a potential easing in the recent rate fluctuations, forecasting a reduction to near 6% for the 30-year fixed rate by the close of the year.
Joseph S. Restivo, President & CEO of American Mortgage Network