It would provide a little bit of breathing room to plan, and borrowers may find there are more financing options available to them.īecause there are fewer buyers on the market, lenders are competing for a smaller pool of applicants. It remains to be seen if mortgage rates are near a peak, but even a slower pace of rate gains would be good news for buyers. Pending homes sales, a measure of signed sales contracts that have yet to close, were down even more. In September, the most recent data available, existing home sales decreased by nearly 24%, according to NAR. Higher rates have caused a chill in the housing market. During the past three months, the mortgage payment on a typical starter home valued at $338,700 for borrowers able to put 10% down was $1,808, according to the National Association of Realtors. Higher interest rates have dramatically increased the cost of buying a home this year. When they started hiking the federal funds rate in March to combat inflation, mortgage rates followed suit again. When the Fed reduced the fed funds rate to near zero at the start of the pandemic, mortgage rates fell dramatically. While the Fed does not set mortgage rates, what it does with the federal funds rate (the rate banks charge each other for overnight loans) influences what lenders charge for all sorts of debt - including mortgages. How high mortgage rates impact the housing market All loans are subject to credit approval. Now, the Fed is more likely to make a smaller increase at its December meeting and mortgage rates are more likely to stick to a narrow range. The Fed indicated it would continue making large interest rate hikes until inflation showed signs of slowing, which Sturtevant says likely would have pushed mortgage rates toward 8%. Rates stabilizing around 7% may not sound like good news, but it’s a far better scenario than might have played out if inflation kept climbing. “All those factors that are propping up mortgage rates are still going to be in the ether,” adds Sturtevant. However, Sturtevant doesn’t see mortgage rates dropping far from their current level for the time being. (The news had an immediate effect on daily mortgage rate measurements, with Money’s average 30-year rate tumbling by more than half a percentage point between Wednesday and Thursday.) Half that increase has been just since August, a period when rates have been particularly volatile. Mortgage rates, as measured by Freddie Mac, have increased on an almost weekly basis since the beginning of the year and are currently above 7% - nearly 4 percentage points higher than they were during the first week of January. “I think they’re starting to see interest rate hikes have the intended effect,” says Sturtevant, allowing the Fed to “back off those regular increases to the federal funds rate.”Īs a result, she expects mortgage rates could soon stabilize. The lower reading means that the Federal Reserve may finally ease up on its aggressive campaign to tame inflation, says Lisa Sturtevant, chief economist at Bright MLS, a home listing platform that serves the Mid-Atlantic region. The latest report from the Bureau of Labor Statistics indicates that year-over-year inflation fell to 7.7% in October, half a percentage point lower than the September reading of 8.2%. Hope for relief from rapidly rising mortgage rates was revived this week when October inflation numbers came in lower than expected.Ĭonsumer prices continued to increase last month but at a slower pace than at any other point this year. Don't wait any longer, start your journey today! Becoming a homeowner is closer than you think with AmeriSave Mortgage.
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