Mortgage rates have ticked down slightly in the past few days, though they still remain above 5%.

On Wednesday, the latest Consumer Price Index data was released by the Bureau of Labor Statistics, showing that prices have risen 8.3% year over year in April. This is a slight deceleration from March, when the CPI hit an annual rate of 8.5%. The Federal Reserve has already raised the federal funds rate twice this year to calm this high rate of inflation, and mortgage rates have been increasing as a result. 

Even though rates are up, that doesn’t necessarily mean it’s a bad time to buy a house. Depending on where you live, purchasing a home may end up being a better deal than renting.

“I still believe we are in a market that is advantageous to buy or own in,” says Ralph DiBugnara, president of Home Qualified and senior vice president of Cardinal Financial. “Higher rates mean less buying power in some cases, but rent is rising as fast or faster than home prices because of inflation, making buying the more ideal option for many.”

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Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.

By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.

Are mortgage rates going up?

Mortgage rates started ticking up from historic lows in the second half of 2021, and will likely continue to increase throughout 2022. This is in large part due to high levels of inflation and policy response to rising prices.

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In the last 12 months, the Consumer Price Index rose by 8.3%. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate five more times this year, following a 0.25% increase at its March meeting and a 0.5% increase in May.

Though not directly tied to the federal funds rate, mortgage rates are often pushed up as a result of Fed rate hikes. As the central bank continues to tighten monetary policy to lower inflation, it’s likely that mortgage rates will remain elevated.

What do high rates mean for the housing market?

When mortgage rates go up, home shoppers’ buying power decreases, as more of their anticipated housing budget has to go toward paying interest. If rates get high enough, buyers can get priced out of the market completely, which cools demand and puts downward pressure on home price growth.

However, that doesn’t mean home prices will fall — in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen in the past couple years.

Even though high rates slow demand, low inventory will keep pushing prices up, says DiBugnara.

“There’s such a shortage that even if 50% of the people stop looking today, you would still have a high demand,” he says. “So I just think that because …read more

Source:: Business Insider

      

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