If you bought a house recently, you likely weren't too pleased with the interest rate on your mortgage. Thanks in part to the Federal Reserve's series of rate hikes, interest rates on a 30-year fixed-rate loan soared to more than 7% by November, according to data from mortgage originator Freddie Mac. Higher rates have added pressure to the housing market, causing prices to fall and loan applications to sink.
But some of that pressure is easing as mortgage rates have dipped. According to data released today from the Mortgage Bankers Association (MBA), applications to refinance home loans jumped 5% last week, though they still remain 86% lower than this time last year. However, applications to purchase a home dropped to the lowest level since 2014.
Unfortunately, if you're thinking about waiting a little longer to refinance or score a lower rate on a mortgage, you might be in for an unwelcome surprise. The Federal Reserve is largely expected to continue to hike rates going forward, including at their next policy meeting that kicks off at the end of the month. That means that mortgage rates are likely to rise in the near future.
While this could bring you some economic pain in the form of a higher monthly mortgage payment, the increasing rates might also give you some negotiating power with homesellers, who have been dropping asking prices.
But how much will mortgage rates rise? That depends in part on how much the Fed decides to hike rates going forward. And their decision could be impacted by how high inflation remains. Tomorrow, the Labor Department's Consumer Price Index (CPI) will be released, showing how much inflation has eased amid the central bank's rate hikes. The more inflation comes down, the more likely the Fed will be moderate going forward.
- Kristin
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