Mortgage Rates Rise Again, Pushing Up Borrowing Costs

The average rate on a 30-year mortgage has risen for the first time since late May, making it more expensive for people to borrow money to buy or refinance a home. The rise in rates follows a four-week pullback and has mostly hovered around 7% this year.

Rate Details

The rate on a 30-year fixed-rate mortgage rose to 6.95% from 6.86% last week, according to Freddie Mac, a mortgage buyer. A year ago, the rate averaged 6.81%. The rise in rates can add hundreds of dollars to the monthly cost of a mortgage for borrowers.

15-Year Fixed-Rate Mortgages

The rate on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week, increasing the average rate to 6.25% from 6.16% last week. A year ago, it averaged 6.24%, Freddie Mac said.

Mortgage Rate Factors

Mortgage rates are influenced by several factors, including:

• The bond market’s reaction to the Federal Reserve’s interest rate policy
• The move in the 10-year Treasury yield, which lenders use as a guide to pricing home loans

Fed Interest Rate Policy

The yield on the 10-year Treasury note, which topped 4.7% in late April, has been declining since then on hopes that inflation is slowing enough to get the Fed to lower its main interest rate from the highest level in more than two decades.

Fed Officials

Fed officials have said that inflation has moved closer to the Fed’s target level of 2% in recent months and have signaled that they expect to cut the central bank’s benchmark rate once this year.

When Will Mortgage Rates Fall Again?

Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to budge from where they are now. Most economists think the Fed’s first rate cut will occur in September, with potentially another cut by year’s end.

Expert Insights

"I think we may actually start to see rates fall sooner than expected," said Lisa Sturtevant, chief economist at Bright MLS. "While today’s report is not what homebuyers were hoping for, I think we’ll see rates fall later this year."

Home Sales Slump

The elevated mortgage rates and record-high home prices have discouraged many would-be homebuyers, leading to a slump in home sales. Despite declining sales, home prices hit an all-time high in May of $419,300.

Home Sales Trend

Sales of previously occupied U.S. homes fell in May for the third month in a row, and indications are that June saw a pullback as well.

Prospects for the Future

Most economists’ projections call for the average rate on a 30-year home loan to remain above 6% this year. However, some experts think rates may moderately decrease in the second half of the year, given additional inventory and potential price growth.

Conclusion

The rise in mortgage rates may be a challenge for homebuyers, but it’s also a reminder that the housing market is a complex system influenced by various factors. As interest rates and home prices continue to evolve, homebuyers and homeowners alike must stay informed to make the most of their opportunities.

FAQs

Q: What is the current average rate on a 30-year mortgage?
A: The average rate on a 30-year mortgage rose to 6.95% from 6.86% last week.

Q: Will mortgage rates continue to rise?
A: No, most economists think the Fed’s first rate cut will occur in September, with potentially another cut by year’s end.

Q: What is the impact of rising mortgage rates on homebuyers?
A: The rise in rates can add hundreds of dollars to the monthly cost of a mortgage for borrowers.

Q: When can we expect mortgage rates to fall again?
A: Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to budge from where they are now.

Author: fortune.com

Orginal Source link