Tag Archives: Interest Rates

Are Mortgage Rates Scary?

Mortgage Rates Will Come Down, It’s Just a Matter of Time

Mortgage Rates Will Come Down, It’s Just a Matter of Time | MyKCM

This past year, rising mortgage rates have slowed the red-hot housing market. Over the past nine months, we’ve seen fewer homes sold than the previous month as home price growth has slowed. All of this is due to the fact that the average 30-year fixed mortgage rate has doubled this year, severely limiting homebuying power for consumers. And, this month, the average rate for financing a home briefly rose over 7% before coming back down into the high 6% range. But we’re starting to see a hint of what mortgage interest rates could look like next year.

Inflation Is the Enemy of Long-Term Interest Rates

As long as inflation is high, we’ll see higher mortgage rates. Over the past couple of weeks, we’ve seen indications that inflation may be cooling, giving us a glimpse into what may happen in the future. The mortgage market is eagerly awaiting positive news on inflation. As Ali Wolf, Chief Economist at Zonda, says:

“The housing market is expected to face continued uncertainty heading into 2023 as consumers, financial markets, and policymakers work through their respective challenges in today’s economy. . . . we are watching for any additional stability in the MBS market, signs of cooling inflation, and/or less aggressive Federal Reserve action to give us confidence that mortgage rates are past their peak.”

What Does This Mean for the Future of Mortgage Rates?

As we get through the inflation battle and start to see that coming down, we should expect mortgage rates to follow. We’ve seen nods of this over the past couple of weeks. As the Federal Reserve works to bring inflation down, mortgage rates will come down as well. Bill McBride from Calculated Risk says:

“My current view is inflation will ease quicker than the Fed currently expects.”

As we look toward next year, we certainly hope he’s right.

Bottom Line

Mortgage rates will come down – it’s just a matter of time. The hope is we continue to see more positive news on inflation, and that’ll bring mortgage rates down. This will give prospective homebuyers more buying power and lead to more homeowners throughout the country.

The FED Raised Rates – Is It Still A Good Time To Buy/Sell A Home?

As was widely expected, The Federal Reserve raised interest rates, and indicated that they will continue to do so throughout the year.  This actually indicates that things are good in our economy… a positive sign that consumers are spending money, and prices are being pushed upward by the forces of supply and demand.  Interest rates are like a “brake system” on a train, when things start moving too fast apply the brakes, to slow the train down.  Likewise, when the economy starts to “move too fast”, prices are getting pushed higher (Inflation) so a slight increase in interest rates will temper, or slow down, these price increases.  Inflation, like our debt, diet, and data, needs to be managed so it  doesn’t become a problem.  Which was why The Fed repeatedly lowered interest rates during the depths of The Great Recession – to spur economic activity (buying stuff.)

1st Home Mortgage

What will this mean for me?  If you have a 30 year mortgage of $250,000, at a fixed interest rate of 5%, the monthly payment (not including taxes and insurances) would be about $1,342. A rate increase to 5.25% would raise your monthly payment by about $35.  Most consumers spend more than that on coffee every month.  Will that be detrimental for some consumers? Probably.  However, rising incomes, should mitigate that affect.  The US unemployment rate is 4.1%, and Full Employment is considered to be about 5%.  Many economists believe that this dynamic pushes wages higher so (theoretically) more people should be able to afford the extra $35/month.

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If you are considering Selling your house, you should act sooner and not later. Inventory is tight, so there is not much competition at this time; but more people may list their homes for sale increasing the competition. You best option is to contact a Full Time, Experienced, REALTOR® to get the answers to your questions for your situation.  Feel free to call me, Joe Luca at 401-580-9797.  All questions are welcomed and answers are free and without obligation.

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