Mortgage Rates Climb To New High Of 6.02% Ahead Of Fed Meeting

Mortgage Rates Climb To New High Of 6.02% Ahead Of Fed Meeting
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Rates for home loans this week topped 6% for the first time in nearly 14 years as forecasters are likely to shift their mortgage rate predictions even higher in anticipation of another rate hike by the Federal Reserve during next week’s meeting.

The 30-year, fixed-rate mortgage averaged 6.02% for the week ending September 15, up from 5.89% in the previous week, according to Freddie Mac. The most popular mortgage product hasn’t topped 6% since November 2008. Last year at this time, it averaged less than half that—2.86%.

The 15-year, fixed-rate mortgage averaged 5.21% this week, versus 5.16% last week. It was the first time since June 2009 that the 15-year-fixed reached 5%. A year ago, it averaged 2.12%.

The average 5/1 adjustable-rate mortgage (ARM) was 4.93%, up from 4.64% last week and 2.51% a year ago. With lower rates than those on fixed-rate mortgages, ARMs have become more popular this year: They made up 9.1% of all mortgage applications in the most recent week, according to the Mortgage Bankers Association (MBA).

Those rates don’t include fees and other costs associated with obtaining home loans.

Related: Compare Current Mortgage Rates

What’s Ahead for Mortgage Rates?

Mortgage rates follow the path of the bond market, which takes its cues from the Fed’s rate moves. The central bank has raised the federal funds rate throughout the year in an effort to rein in inflation, and most analysts say another sizable rate hike is coming Sept. 21 after the latest inflation report showed prices continued to accelerate in August.

Mortgage rates aren’t directly impacted by the Fed’s actions, but they are tied to movement in the bond market—so when yields go up, so do mortgage rates. And when the Fed raises rates, investors tend to sell their bonds, causing bond prices to go down, and yields go up.

“Interest rates continue to be volatile as markets adjust expectations for Fed rate hikes,” said Zillow Home Loans vice president Paul Thomas, in a statement. The latest Consumer Price Index “showed more persistent inflation than expected. As a result, investors are now fully pricing in a 75-basis point hike in the Fed Funds rate at the next FOMC meeting, driving up interest rates.”

Many mortgage market forecasts released over the summer called for rates to move roughly sideways, ending the year with an average 5% for the 30-year fixed. After this week’s sharp moves, however, it’s possible that some experts may revise their forecasts higher.

How Is the Housing Market Adapting?

The speed and magnitude of the shift in the housing market has been, for many people, a “hard pill to swallow,” says Anna Fiascone, a real estate agent in the western suburbs of Chicago.

In Fiascone’s area, there are multiple price points to choose from, which has made things a little easier for house hunters facing intense competition and limited supply, while rent is still much higher than most mortgage payments, she says.

But as home prices and mortgage rates continue to rise, many buyers simply can’t keep up. The average monthly mortgage payment is now $2,100 based on this week’s mortgage rate, up 66% from a year ago, according to Realtor.com.

For anyone on the sidelines waiting for mortgage rates or prices—or both—to come down, Fiascone says it’s foolish to try to time the market.

“If you see something you love, you should move forward,” she says. “Do what’s best for your family. Historically, rates are still low.”

And if rates do fall in the future, you can always seek to refinance into a lower rate. “Your forever home does not have to be your forever rate,” Fiascone says.

Related: Compare Current Mortgage Refinance Rates

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