Mortgage rates were expected to drop this year, according to experts. So, why did Freddie Mac report this week that rates leaped from 6.88% to 7.01%, the highest of the year so far?
Well that’s tied to the Federal Reserve Bank, which has been raising interest rates in an effort to curb high inflation seen since the COVID-19 pandemic. Inflation in the U.S. rose yet again last month – driven by shelter and gas – and that means that it might take some time before the Fed decides to lower rates.
“Economists predict that mortgage rates will remain elevated for the first half of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates,” explained Fox Business. “Even then, rates are unlikely to return to the lows seen during the pandemic.”
Scarce inventory and high homes prices also contributed to a rise in shelter on the latest Consumer Price Index report issued by the U.S. Bureau of Labor Statistics.
High mortgage rates last year had an impact on the job market and a drop in home sales, according to Audacy reports. This year, it looks like rates could continue to put pressure on people buying and selling homes.
“As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year,” said Freddie Mac. “Last week, purchase applications rose modestly, but it remains unclear how many homebuyers can withstand increasing rates in the future.”
