Rates for the 30-year mortgage kept climbing last week, but so have opportunities for borrowers to find some savings if they shop around for a better rate, Freddie Mac said.
The average rate for a 30-year fixed-rate mortgage loan increased to 5.89% for the week ending Sept. 8, according to Freddie Mac’s Primary Mortgage Market Survey. This is an increase from last week when it averaged 5.66% and is significantly higher than last year when it was 2.87%.
Other loan terms also increased this week. The 15-year mortgage rose to 5.16%, up from 4.98% last week. Last year at this time, the rate was 2.18%. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 4.64%, up from 4.51% and up from 2.43% last year.
“Mortgage rates rose again as markets continue to manage the prospect of more aggressive monetary policy to combat elevated inflation,” Sam Khater, Freddie Mac’s chief economist, said. “Not only are mortgage rates rising, but the dispersion of rates also has increased, meaning that borrowers can benefit from shopping around for a better rate.”
Khater said borrowers could find a $1,500 savings over the life of the loan with just one additional quote and five quotes could bring a $3,000 discount to the loan amount.
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Rates climb in reaction to economic uncertainty, expert says
Mortgage rate volatility has been high in the last couple of months, driven by fluctuations in economic data.
The Federal Reserve has raised interest rates twice in a row to curb high inflation. Policymakers approved 75 basis point interest rate hikes in June and July. The expectation is the Fed will raise rates again during their September meeting, though by how much is still in question.
The latest employment report by the Bureau of Labor Statistics (BLS) showed strong job growth in August, with the U.S. economy adding 315,000 new jobs. Curt Long, National Association of Federally-Insured Credit Unions‘ (NAFCU) chief economist and vice president of research, said in a statement that the August report could “ward off fears of a recession.”
This week, investors looked for the release of the Federal Reserve’s Beige Book, which provides a regional pulse on the U.S. economy and indicators of what may happen with interest rates at the Fed’s meeting at the end of September. Wednesday’s report indicated that prices remain elevated across all 12 Fed districts, though nine of these districts reported a moderating rate of increase.
“This could be an early sign of the eventual ease in inflation, which would precede slowed interest rate hikes,” Hannah Jones, economic data analyst for Realtor.com, said in a statement.
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Americans expecting home prices to go down, survey shows
Sidelined homebuyers could be banking on lower home prices before re-entering the market. Fannie Mae’s latest home purchase sentiment index showed that 33% of homebuyers expected prices would decrease. Moreover, Americans anticipating prices to keep increasing declined by 9%, month-over-month.
“The share of consumers expecting home prices to go down over the next year increased substantially in August,” Doug Duncan, Fannie Mae’s chief economist, said. “We also observed a large decline in consumers reporting high home prices as the primary reason for it being a good time to sell a home, suggesting that expectations of slowing or declining home prices have begun to negatively affect selling sentiment.”
Jones said homebuyers are indeed seeing some relief from record-high listing prices. In August, home prices dropped 3.1% from the previous month, according to Realtor.com. Still, high mortgage rates meant borrowers in August paid, on average, roughly $2,100 in monthly mortgage payments, $800 more than last August.
“As the summer wraps up and kids head back into the classroom, typical seasonal trends of cooling demand coupled with this year’s rebalancing housing market will mean more homes are up for grabs for buyers who are still looking this fall,” Jones said. “There is hope on the horizon as increased inventory and slowing time on market means buyers may benefit from more price reductions and more homes in their budget.”
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