deceleration of federal reserveWednesday’s announcement of a short-term US rate hike was welcome news for the mortgage market, boosting expectations that 30-year mortgage rates will fall throughout 2023.
Mortgage rates are on a downward trend, but interest rates are still higher than they were 12 months ago, but some experts expect the downward pressure on rates to provide opportunities for buyers.
The Federal Reserve controls short-term interest rates, but long-term interest rates, including the 30-year mortgage rate, are a function of market expectations about the direction of the economy. Mortgage Bankers Associationsaid in a statement.
“Investors are betting that a slowing economy and the Fed’s eventual victory over inflation will drive interest rates down over time,” Fratantoni said. The MBA expects mortgage rates to slow down to nearly 5% through 2023, he said.
Mortgages are priced primarily based on long-term interest rates, so the shape of the yield curve will also be important, said Shampa Bhattacharya, director Fitch Rating, Said. The Fed’s latest decision to raise rates at a slower pace could be “increasingly positive for the mortgage market as long-term rates continue to fall.”
30-year mortgage rates peaked above 7% in November 2022 but have since trended downward to 6.13%, with yields now at 3.5% from above 4% in October and November. Following the move on the long side of the curve, Bhattacharya said. .
The 10-year Treasury bond, which drives the movement of mortgage rates, fell to 3.39% on Wednesday. The rate he was 3.43% in mid-January. Bureau of Labor Statistics The consumer price index for December was released, but it fell for the sixth consecutive month.
Lawrence Yun says the recent slowdown in inflation has led to slower rate hikes. National Real Estate Association The central bank has signaled its willingness to adjust policy based on data, he said.
Fed Chairman Jerome Powell said at a news conference that he “won’t see a rate cut this year,” but Yoon maintained hope that a rate cut could occur by the end of 2023.
“As apartment vacancies rise in the coming months and inflation subsides further, the Fed will adjust to raising interest-free rates by mid-year and even lowering them by December. It is good news for us and could drop to 5.5% by the end of the year,” said Yun.
The 30-year fixed rate fell to 6.16% on Tuesday, down from 6.5% about a month ago. optimal blue Data of Housing Wire’s Mortgage Rate CenterAt 3.8% as of February 2022, interest rates remain nearly 60% higher than a year ago.
But there are concerns that rising interest rates will put many homeownership dreams on hold, said Justin Barry, partner at law firm Morris Manning & Martin.
“Rising interest rates and rising mortgage rates are presenting new homeownership hurdles for the current renter pool,” Barry said.
Opportunity for Buyers
This year is expected to offer more opportunities for buyers looking to see more homes for sale and lower prices across the housing market.
“The median list price has fallen 11% from its peak in June 2022,” he said. Realtor.com, Said.
“For mid-priced home buyers, these low prices translate to savings of $9,800 on a 20% down payment. This is a welcome change for households still feeling the pressure from higher prices and higher borrowing costs,” he added.
Existing home sales have declined over the past 12 months, falling from an annualized rate of 6.5 million units in January 2022 to just over 4 million units in December. This is his slowest pace since 2010.
US house prices This week’s stats show five straight months of decline since last November. S&P CoreLogic Case-Shiller National Home Price Index.
Mortgage originators don’t think the Fed rate hike will have much impact on buyers. First-time buyers in particular are becoming more realistic about the higher interest rate environment and looking to enter the market, he said.
As Ben Cohen, Managing Director of Guaranteed Rates, said in a recent interview with HousingWire:
“The rent is higher. Their landlord is calling, ‘I’m raising your $2,500 rent to $3,000.'” They just go buy houses,” Cohen said.
Andrew Marquis, Regional Vice President cross country mortgagealso noted that they are doing twice as many pre-approvals than they were doing in the fall due to lower fees.
“Many clients ask for pre-approval. They want fully-underwritten approval so that they may waive contingencies again,” Marquis said.
