Mortgage rates could remain high over the next year as the Federal Reserve continues to raise rates to combat rising inflation, according to a recent report from Freddie Mac.
Mortgage interest rates have been increasing at their fastest pace since the 1980s, according to Freddie Mac’s Quarterly Forecast report. The housing giant expects mortgage rates to remain elevated in 2023 with an average rate of 6.4% for the 30-year mortgage. That’s up from an average 5.4% in 2022 and 3% in 2021, Freddie Mac said in its report.
“Mortgage rates continue to hover around 7% as the dynamics of a once-hot housing market have faded considerably,” Freddie Mac Chief Economist Sam Khater said in a weekly mortgage report in November. “Unsure buyers navigating an unpredictable landscape keeps demand declining while other potential buyers remain sidelined from an affordability standpoint.”
The average fixed-rate 30-year mortgage has fallen over the past month and currently stands near at 6.33%, according to data from Freddie Mac.
Borrowers can take advantage of today’s lower interest rates and save money before rates move higher. Visit Credible to compare multiple mortgage lenders at once without affecting your credit score.
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Interest rates to remain high
Like much of the economy, the housing market has been affected by soaring inflation. The rate of inflation rose by 7.1% year-over-year in November, according to the Bureau of Labor Statistics (BLS).
To combat inflation, the Fed raised interest rates by 75 basis points in November, marking the sixth hike this year. And the central bank is expected to keep raising interest rates into next year.
And that may have a ripple effect on mortgage rates.
“Because mortgage rates have moved so fast, buyers may see a minor recalibration in the weeks ahead, but higher rates are likely to stick around until inflation makes much bigger strides back toward the 2% target,” Realtor.com said in a report.
Mortgage rates are currently trending down, but could begin to increase once again. Visit Credible to compare rates from different mortgage lenders at once and find the one that’s right for you.
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Home prices are making buying a home more difficult
While mortgage rates have increased since last year, so have home prices. In fact, home prices have increased 40% since 2020, according to Freddie Mac.
The average sales price for a home in the third quarter of 2022 was $542,900, according to data by the Federal Reserve bank of St. Louis. That’s up from $473,000 in the third quarter of 2021.
“We expect house prices to decline modestly, but the downside risks are elevated,” Freddie Mac said in its forecast. “As the labor market cools off, housing demand will remain weak in 2023, potentially resulting in declines in prices next year. However, home price forecast uncertainty is wide due to interest rate volatility and the potential of a recession on the horizon.”
One way that you can take advantage of the current interest rates before they rise further is by refinancing your mortgage to reduce your monthly payments. To see if this is the best option, visit Credible to speak to a mortgage expert and get all of your questions answered.
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