Mortgage rates experienced a significant rise this week to almost 7%, reaching their peak for the year. However, experts suggest that rates may start to soften in the upcoming weeks based on recent inflation data.
According to Freddie Mac, the rate on a 30-year fixed mortgage climbed from 6.81% to 6.96% compared to the previous week. Nevertheless, there is an expectation of a decline in rates next week, as newly released government data on Wednesday indicated a cooling in inflation, reaching its lowest level since early 2021.
It is important to note that the Freddie Mac survey collects data from Thursday to Wednesday and may not fully reflect the latest market response to inflation data.
Realtor.com provides further insight: At the current rate of 6.96%, the monthly mortgage payment for a median-priced home listing of $445,000 amounts to $2,565. In comparison, the monthly payment was $2,527 when rates were at 6.81% just a week ago. These calculations assume a down payment of at least 13%.
The increase in rates poses challenges for potential homebuyers. Higher rates have deterred homeowners from listing their properties, resulting in a tight inventory and elevated home prices.
Realtor.com economist Jiayi Xu expressed in a statement, “[This week’s] encouraging inflation data could influence another ‘wait-and-see’ approach in the upcoming FOMC meeting, potentially leading to a reversal in the recent upward trend of mortgage rates. This, in turn, would create a more favorable environment for those looking to purchase a home in the upcoming fall season.”
The Mortgage Bankers Association (MBA) reported that mortgage demand for home purchases reached its lowest point in a month toward the end of June, but there was a modest increase during the Fourth of July weekend. According to the MBA, the volume of purchase applications rose by 2% on a seasonally adjusted basis for the week ending July 7, although it remained 26% lower than the same week a year ago.
MBA Deputy Chief Economist Joel Kan stated, “The rise in purchase activity was driven by increases in both FHA and VA purchase applications.” These types of loans typically attract first-time buyers, who make up a larger share of the buyer pool due to “move-up buyers” being hesitant to sell their current homes and lose their existing low mortgage rates.
However, a challenge for first-time buyers lies in finding homes that fit within their budget constraints.
Buyer confidence was also weak in June, with at least 78% of potential buyers considering it a bad time to purchase a home, according to Fannie Mae’s latest confidence index. Only 22% of those surveyed believed it was a good time to buy.
{Matzav.com}
