Today’s Mortgage and Refinance Rates August 14, 2023 | Volatile Rates

Today's Mortgage and Refinance Rates August 14, 2023 | Volatile Rates

Mortgage Rates: Volatility, Inflation, and Future Trends

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Mortgage rates have been experiencing a turbulent start to the month, causing uncertainty among homebuyers and homeowners alike. Average 30-year mortgage rates began August at around 6.50% but quickly shot up near 7%. While they have wavered over the last couple of weeks, there is a concerning upward trend back towards 7% again.

The recent release of the July Consumer Price Index by the Bureau of Labor Statistics has revealed that inflation has increased year over year for the first time in 12 months. Although the increase isn’t drastic, it does suggest that mortgage rates will likely remain high for a while longer. Many experts had predicted a more significant increase in inflation, making it a relief for now, but cautioning against immediate rate reductions.

Current Mortgage Rates

There are various types of mortgage rates available, catering to the diverse needs of borrowers. Let’s take a closer look at two popular options:

30-Year Fixed Mortgage Rates

30-Year Fixed Mortgage Rates

According to Freddie Mac, this week’s average 30-year fixed mortgage rate stands at 6.96%, representing a six-point increase from the previous week. The 30-year fixed-rate mortgage is the most common type of home loan, offering borrowers the advantage of a stable interest rate throughout the loan’s entire term.

While the lengthy 30-year term allows for lower and more manageable monthly payments, it does come with a trade-off: a higher interest rate compared to shorter-term or adjustable-rate mortgages. Therefore, borrowers who prioritize long-term stability may find this option appealing.

15-Year Fixed Mortgage Rates

15-Year Fixed Mortgage Rates

The average 15-year fixed mortgage rate currently sits at 6.34%, according to Freddie Mac data. This rate reflects a nine-basis-point increase from the prior week. A 15-year fixed-rate mortgage offers borrowers the benefits of both a fixed interest rate and a reduced loan term.

While the monthly payments may be higher compared to a 30-year mortgage, the potential interest savings over the life of the loan can be substantial. This option is particularly attractive for those looking to pay off their mortgage faster and save on long-term interest costs.

The Influence of Federal Rate Hikes on Mortgages

The Federal Reserve has taken significant measures to control economic growth and manage inflation, including substantial increases to the federal funds rate. Despite these efforts, inflation has remained above the Fed’s 2% target rate. Though mortgage rates are not directly affected by changes to the federal funds rate, they often fluctuate in anticipation of future moves by the Fed.

Mortgage rates are primarily influenced by investor demand for mortgage-backed securities. This demand is often impacted by investor expectations concerning the broader economy and the potential effects of future Fed rate hikes. As inflation gradually comes down, mortgage rates should follow suit. However, the Fed has hinted at waiting for further decreases in inflation before adjusting rates, potentially pointing towards more rate hikes in the near future.

Future Outlook: When Will Mortgage Rates Go Down?

After a dramatic increase in 2022 and continued volatility throughout 2023, mortgage rates are projected to trend downward later this year. In July 2023, the Consumer Price Index rose 3.2% year-over-year, a slight increase from June. The rising inflationary trend is expected to sustain higher mortgage rates. However, if inflation starts to recede in August and September, there may be positive news for the final quarter of 2023.

As inflation gradually decreases, mortgage rates are also likely to ease. While waiting for these rate reductions, homeowners seeking to leverage their home’s value for significant expenses, such as home renovations, may consider a home equity line of credit (HELOC). HELOCs allow borrowers to tap into their home’s equity while maintaining their existing mortgage. Current HELOC rates are relatively low compared to other loan options, such as credit cards and personal loans.

In conclusion, the recent volatility in mortgage rates, coupled with increased inflation, has created uncertainty in the housing market. As the Federal Reserve continues to monitor economic conditions, it is crucial for borrowers and homeowners to stay informed about the current rates and future trends. By understanding the different mortgage options available and the potential impact of inflation and Fed rate hikes, individuals can make well-informed decisions regarding their home financing needs.