Fixed mortgage rates fall from record high

"Recent volatility makes it difficult to forecast where rates will go next"

Fixed mortgage rates fall from record high

US mortgage rates finally leveled off after rising for five straight weeks but remained well above 7%, according to data from Freddie Mac's latest Primary Mortgage Market Survey (PMMS).

The PMMS survey showed a five-basis-point drop in the 30-year fixed-rate mortgage, down to 7.18% as of August 31. The 15-year mortgage rate stayed unchanged from last week at 6.55%.

"Despite continued high rates, low inventory is keeping house prices steady," said Sam Khater, chief economist at Freddie Mac.

However, affordability issues persisted as house-buying power remained heavily dependent on the changes in mortgage rates, according to First American chief economist Mark Fleming.

"While household income increased by 0.4%, it was not enough to offset the affordability-dampening impact from higher mortgage rates and prices," Fleming said. "Consumer house-buying power declined by nearly $9,000 compared with May and remains $32,000 lower than one year ago."

Read more: US home prices accelerate for fifth consecutive month amid rate hikes

"Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes," Khater added.

"It's unlikely that mortgage rates will revert to the 5.5% levels of 2022 until inflation has moved closer to the Federal Reserve's 2% target and it begins loosening monetary policy, or there's a significant economic downturn," Fleming said. "A likely scenario is that mortgage rates continue to hover in the 6.5% to 7.5% range for the remainder of the year, which means affordability will remain a challenge for many home buyers."

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