Year-to-date, mortgage rates have risen from around 3% to around 6% in June, although they have been falling in recent weeks (see the lowest mortgage rates you could qualify for here). “They’ve been on a roller coaster driven by competing fears of inflation and recession, or the risk of both, which investors are constantly reassessing based on new data releases that are sometimes conflicting,” says Zillow’s senior economist. , Jeff Tucker. So what will happen to rates next?
Nadia Evangelou, senior economist and forecasting director for the National Association of Realtors (NAR), says it’s possible rates could hit 6% again in August. But she adds, “The data shows that mortgage rates have already priced in some of the effects of upcoming Fed rate hikes,” and that future Fed rate hikes may have less of an impact on rates than recent ones. past increases.
Ultimately, mortgage rates could be less volatile in August than they have been in the first seven months of the year, predicts Holden Lewis, real estate and mortgage expert at NerdWallet. “Rates could end the month relatively unchanged from their initial level given the Federal Reserve’s rate-setting committee hike in late July,” Lewis said. (See the lowest mortgage rates you could qualify for here.)
Even amid a wave of hikes this year, Realtor.com chief economist Danielle Hale says stronger economic growth prospects tend to push up long-term rates like mortgage rates, while he weaker economic outlook tends to weigh on rates. “I expect mortgage rates to remain in the 5.5% to 6% range throughout August as the tussle over the economic outlook continues,” Hale said.
Another possibility? Rates go down. Indeed, mortgage rates are already off the highs seen in June and reacting more to rising probabilities of a recession than to inflation data, says Greg McBride, chief financial analyst at Bankrate. “In this scenario, more aggressive Fed action could drive mortgage rates down rather than up, as it would lead to a recession and the possibly lower rates it ushers in,” says Greg McBride, chief financial analyst at Bankrate.
That said, this is the first time in 40 years that we’ve had negative real rates on mortgages, which means the rate of inflation is higher than the interest rate, so as painful as a mortgage at 5.5% or compared to a 2.9% mortgage, still a better deal than parking cash, says Mischa Fisher, chief economist at Angi. “Only 48 months in the past 51 years have had negative interest rates, so history suggests rates have to go up further or inflation has to go down,” Fisher says.
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