After a two-week slump, mortgages are on the rise. As of Thursday, May 18th, the 30-year fixed-rate mortgage hit an average of 6.39%. This time last year, it was pegged at around 5.25%.
According to Freddie Mac chief economist Sam Khater, over the past few weeks, economic fluctuations have kept mortgage rates within a 10-basis point range. Being able to afford a home may still be a struggle, but this has not thrown off potential homebuyers.
Mortgages went over 5% for the first time in over a decade last year and have stayed above the benchmark for the past twelve months. These have since increased to a high of 7.08% as of November 2022.
April in a Nutshell
As of April 30th, rates have see-sawed a great deal but have essentially remained below 6.5%.
According to Realtor.com’s economic data analyst Hannah Jones, mortgages have been sliding within the 6 to 7% range over the past eight months. She added that it is likely that they will stay within this range unless economic data in the coming weeks shows a clearer direction for the US economy.
Buyer demand, an aspect that is sensitive to movement in terms of mortgage rates, as well as still-high home prices and strong inflation, however, have made many potential homebuyers bide their time until they can see better deals.
Cooling Inflation and a Slowing Economy
But mortgage rates may be influenced further by how inflation is finally cooling down, but the economy seems to be slowing down. Indeed, inflation is still much higher than the Federal Reserve’s target levels. Unemployment, likewise, is practically at all-time lows.
Likewise, if Congress fails to decide on the extension of debt limits, the country may default on its debts by June 1st, the first time in history. This could put greater pressure on an already beleaguered housing sector and cause home prices to go up by 22% and drive mortgage rates beyond 8%.
Jones remarked that the economy is on shaky ground and, if the government defaults on its debts, it is possible that interest rates could spike, scrapping any initiatives that could have put the housing market in a better place.
While experts say that a default is unlikely, the congressional impasse about lifting the debt ceiling could drive interest rates even higher.
That said, potential home buyers aren’t just facing higher mortgage rates, but also a very low inventory of homes for sale and heightened competition within an already tight market.