You may have heard mortgage rates are going to stay a bit higher for longer than originally expected. And if you’re wondering why, the answer lies in the latest economic data. Here’s a quick overview of what’s happening with mortgage rates and what experts say is ahead.
When it comes to mortgage rates, factors like the job market, inflation, consumer spending, and geopolitical uncertainty all play a role. But a major influencer right now is the Federal Reserve (the Fed) and its decisions on monetary policy. Early in 2022, the Fed began raising the Federal Funds Rate to slow down the economy and curb inflation. This rate influences bank borrowing costs, which in turn affects mortgage rates. As a result, mortgage rates started to climb significantly.
While inflation has decreased somewhat since its peak, it’s still above the Fed’s target of 2%. This persistent inflation has led to a re-evaluation of monetary policy, resulting in higher mortgage rates, as noted by Sam Khater, Chief Economist at Freddie Mac. He explains that strong economic and inflation data has shifted the market’s expectations about the path of monetary policy.
Greg McBride, Chief Financial Analyst at Bankrate, points out that it’s the long-term outlook for economic growth and inflation that most significantly affects mortgage rates. His advice? Focus on inflation—it’s the central issue.
Experts like Mike Fratantoni, Chief Economist at the Mortgage Bankers Association, believe that while mortgage rates may decrease later this year, the decline won’t be as substantial or rapid as previously anticipated. This view came following the recent Federal Open Market Committee decision, which left the federal funds target unchanged due to ongoing economic strength and high inflation.
The takeaway here is straightforward: while mortgage rates might drop later this year, significant uncertainties remain. This underscores why timing the market is generally seen as a risky strategy. If buying a home now feels right for you, focusing too much on market trends might not be the best approach.
Curious about your home’s value in today’s market? Visit HomeValuePro.com. Have questions? Please text/call me at 916-508-5353 or email me at [email protected]. I’m always happy to help.