Since the start of the year, mortgage rates have climbed from roughly 3% to about 6% in June— though in recent weeks they have dipped down (see the lowest mortgage rates you may 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, sometimes contradictory data releases,” says Zillow senior economist Jeff Tucker. So what will happen to rates next?
Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors (NAR), says it’s possible rates will again reach 6% in August. But she adds: “Data shows that mortgage rates have already priced in some of the effects of the upcoming Fed rate hikes,” and that future rate hikes by the Fed may have less impact on rates than the recent past hikes did.
Ultimately, mortgage rates might be less volatile in August than they’ve been in the first seven months of the year, predicts Holden Lewis, home and mortgage expert at NerdWallet. “Rates might end the month relatively unchanged from where they entered the month given the Federal Reserve rate-setting committee’s hike at the end of July,” says Lewis. ,See the lowest mortgage rates you may qualify for here,
Even amid a flurry of hikes this year, Realtor.com chief economist Danielle Hale says stronger economic growth prospects tend to raise long-term rates like mortgage rates, while a weaker economic outlook tends to weigh on rates. “I expect that we’ll see mortgage rates stay in the 5.5% to 6% range throughout August as the tug-of-war on the economic outlook continues,” says Hale.
Another possibility? Rates fall. Indeed, mortgage rates are already off the highs seen in June and are responding more to the rising odds of recession than to inflation data, says Greg McBride, chief financial analyst at Bankrate. “In this scenario, more aggressive action by the Fed could lead to lower, rather than higher, mortgage rates as it is seen bringing about a recession and the eventually 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, meaning the inflation rate is greater than the interest rate, so as painful as a 5.5% mortgage is relative to a 2.9% mortgage, it’s still a better deal than parking money in cash, says Mischa Fisher, chief economist at Angi. “Only 48 months in the last 51 years have had negative interest rates, so history suggests rates have to rise further or inflation has to drop,” says Fisher.
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