Economists eye two possible scenarios: Rates could rise to 8% or higher by the end of the year, or they could stabilize. Know what to expect.<\/p>\n\n\n\n
Mortgage rates this week dipped slightly below 7%, even after the Federal Reserve aggressively raised its benchmark interest rate again to tame inflation. The 30-year fixed-rate mortgage averaged 6.95% this week after hitting a 20-year high of 7.08% last week, Freddie Mac reports.<\/p>\n\n\n\n
\u201cEven with the Federal Reserve raising its short-term fed funds rate by another large amount, longer-term interest rates look to move only slightly,\u201d says Lawrence Yun, chief economist for the National Association of REALTORS\u00ae. \u201cThe mortgage market has already priced in the latest Fed move.\u201d<\/p>\n\n\n\n
On Wednesday, the Fed approved its fourth consecutive rate hike of three-quarters of a percentage point to help bring down 40-year high inflation. The central bank\u2019s lending rate now falls within the target range of 3.75% to 4%\u2014its highest since January 2008. \u201cThe inflation picture has become more and more challenging over the course of this year,\u201d Fed Chairman Jerome Powell said at a news conference Wednesday. \u201cThat means we have to have policy be more restrictive, and that narrows the path to a soft landing.\u201d<\/p>\n\n\n\n
Mortgage rates will start to \u201cdrift lower\u201d once inflation has been contained\u2014but that could be another year or two, Yun notes. However, the slight dip this week in rates likely will offer little relief to priced-out buyers. \u201cUnsure buyers navigating an unpredictable landscape keeps demand declining while other potential buyers remain sidelined from an affordability standpoint,\u201d says Sam Khater, Freddie Mac\u2019s chief economist.<\/p>\n\n\n\n
Mortgage rates likely will be volatile in the coming weeks, adds Lisa Sturtevant, chief economist for Bright MLS. \u201cHome buyers expecting mortgage rates to fall significantly will be disappointed,\u201d she says. \u201cThe question is: Will rates stabilize or will they push even higher?\u201d<\/p>\n\n\n\n
Sturtevant says that if inflation remains stubbornly high, the Federal Reserve could continue to aggressively raise rates. \u201cUnder this scenario of persistently higher inflation, mortgage rates could climb to 8% or beyond in late 2022 and into the first part of 2023,\u201d she says.<\/p>\n\n\n\n
But if October\u2019s inflation data\u2014which will be released next week\u2014shows signs of easing and offers some indication that the Fed\u2019s tactics are working, the Fed could pull back on its rate increases. That could mean mortgage rates would stabilize, \u201cthough probably still remaining around 7%, on average, through the first part of 2023,\u201d she notes.<\/p>\n\n\n\n
Freddie Mac reported the following national averages with mortgage rates for the week ending Nov. 3:<\/p>\n\n\n\n