Mortgage rates increase as market reacts to expected Fed rate hike, experts say

Rates for the 30-year mortgage are up again this week as the market braces for another expected interest rate hike from the Federal Reserve following its meeting in September, according to Freddie Mac.

The average rate for a 30-year fixed-rate mortgage increased to 5.55% for the week ending Aug. 25, according to Freddie Mac's Primary Mortgage Market Survey. This is an increase from last week when it averaged 5.13% and is significantly higher than last year when it was 2.87%.

The 15-year mortgage also rose this week to 4.85%, up from 4.55% last week and up from 2.17% last year. 

By contrast, the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) slightly decreased to 4.36%. This is down from 4.39% last week and up from 2.42% last year.  

"Investors are parsing through data highlighting a resilient economy and keeping an eye on Fed Chairman Powell's statements tomorrow," George Ratiu, Realtor.com's manager of economic research, said in a statement. "Expectations are that he will highlight the central bank's commitment to continued monetary tightening for the remainder of the year."  

If you are looking to purchase a home or refinance your current mortgage, comparing multiple lenders can help you get the best rate. Visit Credible to find your personalized interest rate without affecting your credit score.

Homebuyers remain sidelined 

Homebuyer demand remains muted, with mortgage applications tumbling for the third straight week and remaining at their lowest level in 22 years, the Mortgage Bankers Association (MBA) reported in its Weekly Mortgage Applications survey for the week ending Aug. 19. 

Likewise, the latest data from the National Association of REALTORS® showed that existing home sales dropped 19.9% year over year. And new home sales also plunged nearly 30% in July compared with a year earlier, according to data reported by the U.S. Census Bureau and the Department of Housing and Urban Development. 

High mortgage rates and home prices, as well as economic uncertainty, are behind the drop in demand. 

Home price appreciation slowed recently, but prices were 16% higher in July compared with the same time last year, according to data reported by Zillow. The median-priced home is worth about $40,000 more than in July 2021. 

Economists also anticipate that the Federal Reserve will raise rates again at its upcoming meeting at the end of September, which could add further volatility in mortgage rates.

"The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market," Sam Khater, Freddie Mac's chief economist, said. "Home sales continue to decline, prices are moderating, and consumer confidence is low."  

If you are interested in taking advantage of mortgage rates now before they move higher, you could consider taking out a mortgage refinance to lower your monthly payments and save money over the life of the loan. Visit Credible to find your personalized interest rate without affecting your credit score.

Student debt forgiveness creates relief for homebuyers

Homebuyers dealing with affordability issues could get some relief in the form of student debt forgiveness. President Joe Biden on Wednesday announced that the federal student loan payment pause would be extended until Dec. 31. 

The administration also announced that it would cancel $20,000 in student loan debt per eligible borrower if they went to college on Pell Grants and $10,000 in student loan debt per eligible borrower for those who didn’t.

"The Biden administration's decision to cancel $10,000 or more in student debt for millions of Americans is likely to offer a short-term boost in spending power," Raitu said. "The savings in monthly expenses would bolster household budgets straining against rising prices and rents."

If you want to take out a mortgage or get a mortgage refinance, using an online marketplace like Credible can help you compare lenders and save money. If you have any questions, you can also contact Credible to speak to a home loan expert. 

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