With the Fed’s aggressive actions in raising rates to tackle inflation, economists are predicting that rates will continue rising for the remainder of the year.
This is based on the dramatic rise of the 10 year Treasury yield over the last month to which mortgage rates are loosely tied.
The 30-year, fixed rate loan recently went above 6%, the highest it has been in a decade. Similarly, the average rate for a 15-year loan and 10/1 ARM rose to multi-year highs.
Government controlled mortgage giant, Freddie Mac now forecasts rates on 30-year mortgages will climb to 6.5 percent by the end of this year.
The reason people are concerned about higher rates is that even a two percent rate rise could add about 25 percent to the monthly cost of a home. Here’s an example: $300,000 home at 4% rate = $1.432 monthly payment vs a 300,000 home at 6% rate = $1,798 monthly payment. Big difference.
Housing Market outlook experts predict prices will continue rising as well, though at a more moderate pace. With median prices up about 5 percent through the first six months of the year, the consensus forecast is for prices to rise another 3 percent to 4 percent the remainder of the year, for an annual gain of 8 percent to 9 percent this year.
But is there anyway rates could fall again? Should I wait to purchase or refinance a home
This is also a question I hear a lot. Buy it’s unlikely rates will fall anytime soon, unless the U.S. economy slows down significantly or unemployment spikes.
This will force the Fed to restart another round of bond purchase, or Quantitative Easing, as some call it. And even if rates fall they are not going to come any lower than 4%.
Historically rates are still very low and if you can afford the monthly payment at current rates, then buying or refinancing is still a good idea (see the best rates in your area).
This is particularly the case if you have a loan with interest rates above 6%, want to move to a shorter duration loan and/or dealing with Jumbo loans.