Mortgage rates recently broke a 21-year record, and those hoping for notable declines will likely have to do some waiting.
As of this week, the average rate on a 30-year fixed-rate mortgage was 7.09%, more than double the average before the Federal Reserve started raising interest rates, according to Freddie Mac. The last time rates were this high was March 2002 — and the bad news for homebuyers is they could push even higher.“I don’t think we’re at the peak,” Stephen O’Connor, research professor of real estate at the George Washington University School of Business, told the Washington Examiner.
Many investors expect the Fed to pause hiking at its meeting in September, although O’Connor said he thinks there will be another rate increase next month. He said looking at the notes from past Fed meetings shows central bank officials are still quite torn on what to do, Fed Chairman Jerome Powell is laser-focused on bringing down inflation.
O'Connor noted several sources of uncertainty that could influence the Fed's decision-making. Not only are there mixed signals from various economic gauges, but there are also unknown factors like the ongoing slowdown in China and the war in Ukraine. “It made sense that mortgage rates fell when the Fed cut interest rates to zero and it made sense that they were going to rise when the Fed started tightening, but it’s I think just the intensity and the speed of the increase has really caught everyone by surprise,” he told the Washington Examiner.
“And that’s true, but it’s kind of like there is no way to know when spreads are going to go back to normal,” Ostrowski said.
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