(Daily Mail) Mortgage rates in the US have soared in recent years with the highest 30-year rates seen in more than two decades.
Due to inflation, the Federal Reserve has raised interest rates to cut down on spending, all while mortgage rates have climbed along with it.
From 2022 to 2023, the Central Bank increased its benchmark federal funds rate- the rate at which banks borrow money from each other- 11 times, making it go from zero percent to 5.25-5.50 percent, Yahoo Finance reported.
Today, the median monthly mortgage rate on a new home is $2,256, about seven percent higher than last year, according to Mortgage Bankers Association.
Though it is unclear when exactly mortgage rates will decline, two mortgage companies, Fannie Mae and Mortgage Bankers Association, have predicted that the high prices could gradually fall by the end of 2025.
Today, the median monthly mortgage rate on a new home is $2,256, about seven percent higher when compared to last year
Two mortgage companies, Fannie Mae and Mortgage Bankers Association, have predicted that the high prices could gradually fall by the end of 2025
The high rates have sparked caution amongst homeowners looking to sell and buyers looking to purchase a new home in today’s economy.
‘Homebuyer affordability conditions declined further as mortgage rates remained above 7 percent in April, sidelining many prospective buyers from entering the housing market,’ Mortgage Bankers Association Vice President Edward Seiler, said.
‘In addition to lower mortgage rates, more housing inventory is desperately needed in markets throughout the country this summer to alleviate these tough affordability conditions.’
As of quarter three- from July to September of this year- 30-year mortgage rates are estimated to be at 7.1 percent, but by then of quarter four of next year- October to December- the rates will drop to 6.6 percent, according to Fannie Mae.
Mortgage Bankers Association revealed that during quarter three of 2024 30-year mortgage rates are expected to be at 6.7 percent, and by the end of 2025, that will decrease to 5.9 percent.
Experts have warned that the only way to see mortgage rates drop is to see inflation costs fall as well.
‘In order to see rates improve, we need to see inflation numbers decreasing, new job creations slow down, and potentially unemployment filings to increase,’ Evan Luchaco, a home loan specialist at Churchill Mortgage said.
The high rates have sparked caution amongst homeowners looking to sell and buyers looking to purchase a new home in today’s economy
Luchaco believes that costs could start to go down by the end of this year, but he is not completely positive.
‘These are all economic signs of a slowdown that will spur the Fed to take action in lowering the Fed funds rate, which will have a trickle-down effect to lower mortgage rates,’ he said.
Jennifer Beeston, a senior vice president of mortgage lending at Guaranteed Rate also believes that the only way mortgages could drop is if inflation goes down with it.
‘In order for rates to come down, we need to see inflation ease,’ Beeston told Yahoo Finance.
‘Based on current economic predictors, that looks like potentially fall; however, all the predictions have been wrong for the last two years.’
Although rates are expected to drop in the next year, experts do not believe that they will reach three or four percent like they did during the COVID-19 pandemic.
Neil Christiansen, a home loan specialist at Churchill Mortgage, believes that the only way mortgagee rates will decline is if America goes into a ‘deep recession.’
‘If the Fed sees the economy slowing and stalling, then they could cut rates drastically to jump-start it, but the way things are going, I don’t see a significant cut in rates anytime soon,’ Christiansen said.
