After dropping dramatically late last week, mortgage rates are ticking back up again today. However, they still remain lower than they have been in recent weeks.

Rates have been volatile this month as investors balance record levels of inflation with the growing risk of a recession. 

Even though they’re slightly down compared to previous weeks, they’re still up 2.5 percentage points year-over-year. With so many different factors currently impacting the housing market, homebuying demand has declined.

“It’s certainly understandable that potential homebuyers are concerned and possibly overwhelmed by current levels of inflation, increased rates, low inventory, high home prices and macroeconomic uncertainty,” says Steve Kaminski, head of US residential lending at TD bank. “But as always, I strongly recommend anyone entering the market right now to focus on something imperative that they can control – the fundamentals of preparation.”

If you’re thinking about buying a home soon, familiarize yourself with all the mortgage options available to you and use a mortgage calculator to understand how different rate levels impact your buying power.

Mortgage rates today
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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 have increased significantly so far in 2022. More recently, rates have been relatively volatile.

In the last 12 months, the Consumer Price Index rose by 9.1%. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate three more times this year, following increases in March, May, June, and July.

  Today's mortgage and refinance rates: August 13, 2022 | 30-year fixed rates hover near 5%

Though not directly tied to the federal funds rate, mortgage rates are sometimes pushed up as a result of Fed rate hikes and investor expectations of how those hikes will impact the economy. If inflation remains elevated, mortgage rates may stay at their current levels or even trend up. But as a recession becomes more likely, mortgage rates could fall. 

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 of years.

Even with fewer buyers in the market, those who can afford to buy will still be competing over historically low inventory. When there are more buyers than there are houses available, home prices go up. So while conditions may loosen up a bit due to high rates, we aren’t likely to see a significant drop in …read more

Source:: Business Insider


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