07/19/2023
Mortgage Rates are close to 7%
Mortgage rates continued rising for the third consecutive week, increasing to 6.96%, the highest level since November 2022.
The uptick in mortgage rates came amid positive inflation news – the consumer price index rate showed cooling prices in June, rising just 3.0% from a year ago, the smallest annual increase since March 2021. However, it is unlikely to be enough to prevent an additional rate hike at the next Federal Open Markets Committee meeting on July 25-26. And rates could remain above 6.5% for a while longer, economists said.
Freddie Mac’s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 6.96% as of July 13, up from last week’s 6.81%. By contrast, the 30-year was at 5.51% a year ago at this time.
“Mortgage rates increased to their highest level since November 2022, the last time rates broke seven percent,” said Sam Khater, Freddie Mac’s chief economist. “Incoming data suggest that inflation is softening, falling to its lowest annual rate in more than two years. However, increases in housing costs, which account for a large share of inflation, remain stubbornly high, mainly due to low inventory relative to demand.”
Other mortgage indexes show rates ticking down.
HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 6.85% on Wednesday, compared to 6.92% the previous week. The 30-year fixed rate for conventional loans was 6.96% at Mortgage News Daily on Thursday morning, down 12 basis points from the previous week.
Though a strong job market and cooling inflation means many households will be in a good position to buy a house, high mortgage rates and still-high housing prices continue to present stiff challenges, said Realtor.com economist Jiayi Xu. As a result, home purchases are slowing and more pressure is added on home and rental prices.
Overall, the economy is still very durable, said Lisa Sturtevant, chief economist of Bright MLS. It is highly possible that mortgage rates will remain above 6.5% over the coming weeks.
For buyers out there, being able to find a home to buy and crafting a successful offer that will beat other buyers remains the main challenge, not high mortgage rates, she said. Home price growth has moderated but in many markets, prices are still rising because of limited supply.
While further rate hikes are likely, economists, including Sturtevant, do not think that it’s the solution to induce a significant drop in home prices.
“Without a significant influx of new listings, which will not be possible if existing homeowners feel even more tied to the super low rate they got during the pandemic, the balance between demand and supply will still be tilted toward sellers,” said Sturtevant.
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