Today’s Mortgage and Refinance Rates August 7, 2023 – Rates Still High, May Have Peaked.
Today's Mortgage and Refinance Rates August 7, 2023 - Rates Still High, May Have Peaked.
Finding Affordable Housing Becomes Easier: Mortgage Rates Set to Drop
It is no secret that high mortgage rates have made it challenging for many potential homebuyers to find an affordable housing payment. But there is good news on the horizon. According to the latest quarterly forecast by the National Association of Realtors (NAR), average 30-year mortgage rates are expected to peak this quarter and gradually decrease, ending the year around 6.3%.
NAR chief economist, Lawrence Yun, expressed optimism, stating, “With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out.” This positive outlook is fueled by ongoing job additions and the potential for a meaningful decline in mortgage rates, which could lead to a rush of buyers later this year and into the next.
How Mortgage Rates will Impact Borrowers
Currently, mortgage rates are hovering around 7%, which means a borrower would pay $665 every month for every $100,000 borrowed. However, with the projected 6.3% mortgage rate, the monthly payment would decrease to $619. While this difference may seem small, it can have a significant impact on borrowers’ budgets and make homeownership more affordable.
To understand how today’s mortgage rates would affect your monthly payments, you can use our free mortgage calculator. By plugging in different rates and term lengths, you can assess how different mortgage options will impact your financial situation. Additionally, the calculator provides tips on how to save money on your mortgage in the long run.
Current Mortgage Rates
According to Freddie Mac, the current average 30-year fixed mortgage rate is 6.9%. This reflects a 9-point increase from the previous week. The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, borrowers pay back what they borrowed over 30 years, and the interest rate remains consistent throughout the loan’s lifetime.
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The advantage of a 30-year term is that it allows borrowers to spread out their payments over a longer period, resulting in lower and more manageable monthly payments. However, longer terms typically come with higher rates compared to shorter terms or adjustable rates.
Consider the 15-year Fixed Mortgage Option
If you desire predictability and want to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be the right fit for you. Freddie Mac reports that the average 15-year fixed mortgage rate is 6.25%, showing a 14-point increase from the prior week.
With a 15-year term, borrowers will have a lower interest rate than with a 30-year mortgage, potentially saving tens of thousands of dollars in interest over time. However, keep in mind that the shorter term leads to higher monthly payments compared to longer-term mortgages.
When Can We Expect Mortgage Rates to Decrease?
Mortgage rates have been increasing from historic lows since the second half of 2021, and they have continued to rise by three percentage points in 2022. While rates showed initial downward trends, they have recently ticked back up. The decline in mortgage rates will likely correlate with decreasing inflation rates. If a recession occurs, rates may drop at a faster pace. However, it is expected that average 30-year fixed rates will remain around 6% to 7% throughout 2023.
To cover significant purchases, such as home renovations, homeowners can leverage their home’s value by considering a home equity line of credit (HELOC) while waiting for mortgage rates to ease. HELOCs allow borrowers to borrow against their home’s equity, similar to a credit card, without refinancing their entire mortgage. Currently, HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
Impacts of Federal Reserve Rate Hikes on Mortgages
The Federal Reserve has been increasing the federal funds rate to control economic growth and manage inflation. Although mortgage rates are not directly influenced by changes in the federal funds rate, they often trend before Fed policy moves. This occurs because mortgage rates are based on investor demand for mortgage-backed securities, which can be affected by investors’ expectations regarding the broader economy.
As inflation starts to decrease, mortgage rates should follow suit. However, the Fed has indicated that it will closely monitor sustained signs of slowing inflation before making any significant changes.
In conclusion, homebuyers facing the challenge of high mortgage rates can take solace in the forecasted decrease. With average 30-year mortgage rates expected to peak this quarter and trend downward, homeownership can become more attainable. Meanwhile, individuals can explore various mortgage options, such as the 15-year fixed-rate mortgage, to find the best fit for their financial goals. As we patiently wait for mortgage rates to ease, leveraging a home equity line of credit (HELOC) can provide additional flexibility with relatively low rates. Keep an eye on inflation trends and stay informed about changes in the federal funds rate to anticipate future fluctuations in mortgage rates.
