As predicted, chair Jerome Powell announced the Federal Reserve would raise interest rates by 75-basis points to a range of 2.25% – 2.5%. This will raise the 10-year treasury note, but not necessarily mortgage rates. Keep in mind, the two are not directly connected. The Fed’s latest rate hike to try and curb inflation could tip the economy into a recession, which means mortgage rates could hold steady or even fall.
The latest increase was in line with expectations and the Fed anticipates further increases in the target rate will be ‘appropriate’.
Where will mortgage rates be tomorrow?
Right now, the average national mortgage rate is hovering around 5.5% for a 30-year fixed. It’s possible that we might see mortgage rates go up to 6%, but with inflation jumping up and home sales dropping by 20%, experts believe mortgage rates should start to moderate and possibly even tick down come 2023. Timing the market is tricky if not impossible. What many homebuyers forget is if they lock in a rate now and buy, they’re protected if mortgage rates do go up. As rates start to drop, homeowners can always refinance.
Home sales drop 20%: Good news for first-time home buyers
With the housing market cooling, there’s less competition and first-time home buyers get a better shot at buying their dream home. Plus, first-time home buyers have the advantage of not having to put 20% down. Last year, the average down payment on a house for a first-time homebuyer was 7% of the home price, according to the National Association of Realtors. Good news, indeed!
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John Kistner is Guaranteed Rate’s Market Analyst. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the homebuying process.