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Mortgage rates have been increasing rapidly this month as the Federal Reserve gears up for another 75-basis-point hike to the federal funds rate next week.
Mortgage rates could continue to increase this year, but it’s unclear how much. Rates have been steadily increasing throughout August and September, and 30-year fixed rates are now the highest they’ve been since 2008.
But it’s very unlikely that rates will drop any time soon. Homebuyers who have the ability to wait for lower rates might need to hold off until later next year. For those who need to buy sooner than that, it might be better to start the process now rather than waiting to see if rates moderate in a few months.
“Based on current conditions and expectations, rates will not start going down until there is a consensus in economic data that indicates inflation is under control and the growth in the economy is at a manageable level,” says Scott Haymore, head of mortgage pricing and secondary markets at TD Bank. “Looking at fed funds futures forecast, that looks to be in the second half of 2023.”
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.
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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 8.3%. 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.
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.
Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy.
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 …read more
Source:: Business Insider