After more than doubling the 2.65% 30-year fixed mortgage rate since January 2021, borrowing costs have leveled out and have inched lower from the 7% plus range seen in October 2022. Today rates are hovering in the high 6% range. What has been one of the reasons for the jump in borrowing costs? Raging inflation which began in early 2021 and topping out at 40-year highs in June of 2022.

Over the past year, the Mortgage Bankers Association reports that mortgage application volumes have fallen given the uptick in rates and persistent affordability challenges. Also, many current mortgage holders still have low rates and may not be ready to make a move with costs rising.

What we know is, the Federal Reserve has been hiking interest rates since March 2022 to quell runaway inflation that hit those aforementioned highs a year ago. The Fed has been successful so far as the closely watched inflation reading Consumer Price Index has fallen 70% from that June 2022 high. If this pattern continues with lower inflation, it could be the catalyst to push mortgage rates lower. Costs for energy have declined, rental prices have inched lower while the Census Bureau reports that median and average new home prices fell year-over-year in June.

Many industry analysts feel that this last rate hike by the Fed could be the end of its current series of hikes. If this is the case, it would signal that the initiative of lowering inflation is working which could push borrowing costs lower still.

Bottom line: Families form every day and the need for housing will always be key for those looking to jump into the pool of purchasing the American dream of homeownership.

Source: Mortgage Market Guide