What Is Going on with Mortgage Rates?
You may have heard mortgage rates are expected to stay higher for longer. The reason lies in the latest economic data. Here’s a quick overview of what’s happening and what experts say is ahead.
Economic Factors That Impact Mortgage Rates
Mortgage rates respond to many factors, including the job market, inflation, consumer spending, geopolitical events, and Federal Reserve (the Fed) policy. The Fed began raising the Federal Funds Rate in early 2022 to slow inflation. While this rate doesn’t directly set mortgage rates, it influences them. Since then, rates have climbed. Inflation has improved but is still above the Fed’s 2% target.
As Sam Khater, Chief Economist at Freddie Mac, explains:
“Strong incoming economic and inflation data has caused the market to re-evaluate the path of monetary policy, leading to higher mortgage rates.”
Greg McBride, Chief Financial Analyst at Bankrate, adds:
“It’s the longer-term outlook for economic growth and inflation that have the greatest bearing on the level and direction of mortgage rates. Inflation, inflation, inflation — that’s really the hub on the wheel.”
When Will Mortgage Rates Come Down?
Experts believe inflation will gradually come under control, and the Fed may lower the Federal Funds Rate later this year, though timing may shift with new economic data. Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), said:
“The FOMC did not change the federal funds target at its May meeting, as incoming data regarding the strength of the economy and stubbornly high inflation have resulted in a shift in the timing of a first rate cut. We expect mortgage rates to drop later this year, but not as far or as fast as we previously had predicted.”
In simple terms, mortgage rates should come down later this year, but trying to time the market is not recommended. As Bankrate advises:
“Trying to time the market is generally a bad idea. If buying a house is the right move for you now, don’t stress about trends or economic outlooks.”
Bottom Line
If you have questions about mortgage rates or the housing market and what they mean for you, let’s connect.
