Mortgage

Highest Mortgage Rates In 8 Months — What to Expect Following Last Week’s Fed Announcement

Highest Mortgage Rates In 8 Months — What to Expect Following Last Week’s Fed Announcement
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Mortgage rates rose again last week, coinciding with comments from Federal Reserve Chair Jerome Powell that support what experts have been predicting throughout the year: that rates will rise as the economy recovers next year.

The average 30-year fixed-rate mortgage increased 0.04% last week to 3.28%. This is the second consecutive rate increase and the highest average rate we’ve seen in eight months.

The latest increase is consistent with Powell’s announcement last week that the Fed plans to slow its bond-buying program because “the economy no longer needs increasing amounts of policy support”.

While experts generally expected rates to increase throughout the year, at least one expert made a new specific prediction last week. The 30-year fixed-rate mortgage rate will rise to 3.5% next year, according to Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors (NAR). Yoon presented his prediction during NAR’s year-end real estate outlook summit presentation.

Despite expected rate increases next year, there is still the potential for rates to decline amid the impact of Omicron and other COVID-19 variables, Powell acknowledged last week. “The rise in COVID cases in recent weeks, along with the emergence of the Omicron variant, poses risks to the outlook.”

Here’s a look at where the prices are, where they are today, and what we can expect to see in the future.

About the latest mortgage rates

The average mortgage rate last week is based on mortgage rate information provided by national lenders to Bankrate.com, which is owned by Red Ventures such as NextAdvisor.

Mortgage rates and the housing market: what to expect

Experts predicted that we would see increased rates and volatility in December, and that was largely the case. Last week’s increase in the average 30-year fixed-rate mortgage rate came from 3.24% to 3.28% to its highest threshold in eight months.

Officials from the Federal Reserve’s meeting last Wednesday said there could be up to three rate hikes in 2022. Even before the Fed’s announcements last week, consumers expected rate increases over the next 12 months, according to a housing study by the Federal Reserve. Fannie Mae recently. The speed or slowness of the increase is likely to depend on the health of the economy.

Rising concerns about rising inflation and the Omicron variant of COVID-19 have pushed and dragged prices up and down. The latest CPI recorded the largest rise in inflation in 39 years.

Mortgage rates are likely to fluctuate constantly but remain historically low, Zillow economist Nicole Baswood recently told us. Pachaud said offsetting factors to rising COVID cases and rising inflation will contribute to the volatility we’ll see in mortgage rates going forward.

While the current rates aren’t as low as the less than 3% we saw earlier this year, they’re still pretty low from a historical perspective.

Mortgage rates: a historical look back

The average 30-year fixed-rate mortgage was about 3% one year ago. This is 0.28 percentage point lower than last week’s average. Two years ago, it was at 3.93% – much higher than it is today.

The dramatic drop in rates this year was largely due to the economic effects of the COVID-19 pandemic and the Federal Reserve’s reactive policies in 2020. According to the US Bureau of Labor Statistics (BLS), nearly 9 million workers reported losing their jobs in 2020. In an effort to To avoid widespread foreclosures, the Federal Reserve implemented policies aimed at lowering interest rates to make housing more affordable. Low interest rates can help keep home purchase prices affordable and encourage homeowners to refinance to lower their monthly mortgage payments.

What does the housing market outlook and rate mean for borrowers

This is what the future housing market outlook and projected rise rates mean for potential borrowers.

home buyers

Experts believe that the housing market began to calm down. But with home prices rising over the past year, you may need a larger down payment to stay within a reasonable range. While a lower mortgage rate can help offset down payment expenses, a large home loan can overwhelm potential savings from a lower mortgage rate.

Some experts advise postponing home buying until the market calms down more. Others say not to make time to market and buy when the time is right for your personal situation. With the recent price fluctuations in recent weeks, it is almost impossible to tell the time. “It’s hard to predict what rates will do in the future, just like the stock market,” John Bergquist, managing director at Lift Financial in southern Jordan, Utah, told us. “We are currently near historic lows. With that in mind, I wouldn’t suggest waiting and trying to time the market.”

Whatever the decision, housing experts recommend planning in advance by:

  1. Find out how much home you can afford
  2. Sticking to a home buying budget
  3. Saving for a down payment that is large enough
  4. An experienced real estate agent checks out for you
  5. Do not rush to buy a house

Existing home owners

Now might be a good time to refinance. Homeowners who are on the fence about refinancing may want to consider this. After the Fed’s latest announcement, mortgage rates are expected to continue on their long-term upward trajectory. It may be worth working with the numbers with a few lenders to see if you can benefit. A good rule of thumb is that if you can score a new mortgage rate 0.75%-1% lower than the current rate, you are ready to save.

The rate and term refinancing can go a long way in reducing not only your monthly payments but also the amount of interest paid over the life of the loan. With home values ​​rising across the country over the past year, you can also take advantage of raising your home’s equity by refinancing cash. Cash refinancing is growing in popularity — increasing from 37% to 49% of total refinancing in the first half of this year, according to mortgage data analytics firm Black Knight. Cashback can be a useful tool to help pay off high-interest debt, pay for college expenses, or fund a home improvement project.

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