The 30-year mortgage rate may have reached its highest level in 13 years, but the Mortgage Bankers Association thinks rates will now stay around this level.
Mortgage rates recently were two percentage points higher than they were at the beginning of the year, which is helping to start a market cooldown.
30-year fixed mortgage rates recently hit 5.27 percent, according to Freddie Mac. A year ago, this rate was at 2.69 percent.
The last time rates were at this level was in June 2009, when rates reached 5.42 percent.
However, Mike Fratantoni, MBA senior vice president and chief economist, says the MBA is forecasting mortgage rates are likely to plateau near current levels.
Fratantoni said the financial markets have attempted to price in the impact of the Federal Reserve’s recent funds rate hike and other policy adjustments.
He said these markets are also likely pricing in the economic slowdown that will occur as a result of these actions.
“Once we are past this rate spike and associated volatility, MBA expects that potential homebuyers may be more willing to re-enter the market,” Fratantoni said.
The Fed recently raised its benchmark interest rate by a half percentage point to fight high inflation, which is the biggest rate increase since 2000.
The Fed also is shrinking its $9 trillion balance sheet.
These moves will make consumer loans even more expensive, which experts say means that in the coming months, home price growth will slow down.
At the same time, Joel Berner, senior economic analyst for Realtor.com, says the number of homes for sale is showing signs of improvement.
As the market begins to shift in response to the gradually growing home inventory and slower growing home prices, Berner says prospective buyers could begin to find the competition “thinning out” as more homes pop up on the market.
While some experts have an optimistic outlook on home purchases, Fratantoni said higher rates are likely to keep refinance demand low for the time being.
However, experts say the most important thing for homeowners and prospective buyers to remember is that the decision to purchase or refinance should be personal, rather than dependent on the market fluctuations.
The right time to purchase or refinance doesn’t look the same for everyone, experts say.
Mortgage lenders or brokers who understand this outlook perform the best despite the market twists and turns, experts say. Educating and empowering consumers on making the best decisions for them is the most important factor.
Photo by Kindel Media