What do housing industry experts think?
US mortgage rates surged to their highest level in more than 13 years following the Federal Reserve’s latest interest rate hike.
Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage (FRM) rose more than half a percentage point to 5.78% – the highest since November 2008 and the largest one-week increase since 1987. Last week, the 30-year FRM was 5.23%.
The surge is a result of a “shift in expectations about inflation and the course of monetary policy,” said Freddie Mac chief economist Sam Khater.
Read our guide to mortgage rates by year in the USA to better understand where mortgage rates are going.
Keller Williams chief economist Ruben Gonzalez expounded on Khater’s point: “Earlier this week, we saw a shift in market expectations around how aggressive a path the Fed is likely to take to combat inflation. Mortgage rates going forward will continue to be responsive to changes in expectations around the Fed’s policy path, as well as inflation expectations. The housing market is still extremely tight, with inventory levels remaining near historic lows, leaving room for the market to absorb falling demand.”
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Marty Green, principal at Polunsky Beitel Green, added: “It is clear in talking to mortgage company executives that the recent fluctuations in mortgage interest rates have increased the risks in an already challenging market and the belief that the sooner we get to a stabilized rate environment, even at elevated rates, the better it will be for the industry. The belief is that it will also restore a level of predictability for consumers so that they can more comfortably make their financial decision on a potential move to a new home.”
Based on their conversations with clients, Green believes many market participants approve of the Fed’s aggressive approach, “as there is some belief the Fed’s decision will more quickly bring stability to the home mortgage interest rate environment,” he said.