![]() ![]() If future inflation data is higher than expected, mortgage rates will increase in response. If inflation continues to inch closer to its 2% target and the Fed is able to pause its rate increases, mortgage rates may stabilize or even decrease. In addition to inflation, wage growth, lessened stress from the banking sector and the potential for a US debt ceiling default will continue to influence mortgage rates. But the long-term trajectory of interest rates will depend on current and predicted inflation as well as the broader economic outlook. Mortgage rates, which aren’t directly set by the Fed, will likely continue to move up and down on a weekly basis. ![]() The goal is to curb consumer spending and lower prices by dampening demand. To bring inflation down, the central bank has increased the cost of borrowing money via higher interest rates. Put simply, inflation is a case of too much money chasing too few goods, driving up prices for just about everything in the process. ![]() Rate hikes and cuts are the central bank’s primary tool to rein in or encourage economic growth. Since last March, the Federal Reserve has raised its benchmark federal funds rate from zero to 5.25% - most recently by 0.25% on May 3. Here’s what you need to know about mortgage rates, how they work and how to find the best deal for you. Regardless of what mortgage rates do next, it’s always important to compare offers from different lenders to find the lowest rate and most amenable loan terms. “Ultimately, more certainty about the Fed’s actions will help to smooth out some of the volatility we’ve seen with mortgage rates,” said Odeta Kushi, deputy chief economist at First American Financial Corporation. Though the central bank won’t cut rates any time soon, a pause could help mortgage rates stabilize and even decrease by the end of the year. Instead, the Fed is expected to hold rates steady until inflation reaches its 2% target. That’s an increase of 18 basis points (or 0.18%) from the previous week, according to CNET sister site, Bankrate.īut inflation, which was at 4.9% in April, has been steadily decreasing and the Fed has signaled that ongoing rate increases may no longer be necessary. The average rate for a 30-year fixed mortgage was 6.84% as of May 24. ![]() Mortgage rates, which are indirectly affected by changes to the federal funds rate, have increased in response. During its May meeting, the central bank hiked its benchmark federal funds rate for the 10th time since March 2022. That range is largely due to the Federal Reserve’s ongoing battle against inflation. As of mid-May, mortgage rates continue to bump up and down in the 6% range. Part of the reason behind this slide in prices is that elevated mortgage rates continue to push prospective buyers out of the market.Īfter hitting a 20-year high above 7% in late 2022, mortgage rates dropped significantly in January to 6% before climbing back up closer to 7% in February. In April, the median US home sale price was $407,847, down 4.1% on the previous year, according to real estate brokerage firm Redfin. Despite falling home prices, mortgage rates continue to remain sky-high, well above 6%, which means you still have the opportunity to shop around for a lower rate. ![]()
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