Mortgage rates: quiet for now?

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Published Date 11/6/2023

Everyone’s hoping for it — from buyers to sellers to investors to builders and all those in between. The run-up in mortgage rates might be coming to an end.

When the U.S. Federal Reserve voted on Wednesday to hold its short-term interest rates steady, it suddenly took the pressure off of mortgage interest rates. For now. The big hope is that rates halt their relentless climb.

“My expectation is a gradual slowdown in mortgage rates,” says Realtor.com Chief Economist Danielle Hale. In a push to combat inflation, the Fed has been raising rates by making borrowing money more expensive. Interest rates are currently at a 22-year high, while inflation has come down from a peak of 9.1% in June of last year to 3.7% in September.

So what’s the magic number? When will we begin seeing the central bank begin cutting rates (which is expected to result in lower mortgage rates)? Not until inflation is firmly within its target of 2%. “The Fed has been pretty clear and consistent that rates are going to need to be higher for longer until inflation is under control,” says Hale.

To add to all this, the central bank could vote to continue raising rates later this year or next, as Fed Chair Jerome Powell announced that no one is making any decisions about future meetings.

Realtor.com’s Clare Trapasso explains how higher mortgage rates have effectively frozen the housing market. “Homeowners are reluctant to give up the sub-3% rates they locked in during the COVID-19 pandemic, so they’re staying put instead of trading up or down into new homes. That’s worsening the housing shortage.” She adds that buyers are struggling to afford today’s high home prices at a nearly 8% mortgage rate, while many have dropped out of the market or are waiting for rates to come down.

According to a Realtor.com analysis, the typical monthly mortgage payment was about 90% more than it was just two years ago, taking into consideration median home list prices on Realtor.com in September 2021 compared with September 2023 and average mortgage rates on Nov. 1, 2021, compared with Nov. 1, 2023, on Mortgage News Daily. Property taxes, insurance costs, and homeowners association fees were not included.

The good news for homebuyers is that rates are getting a bit better, according to Mortgage News Daily data. The publication looked at average, daily rates for 30-year fixed-rate loans.

“For now, things seem to be moving in a more friendly direction for homeowners,” says Hale. Trapasso warns however, that real estate experts are often the first to acknowledge they have been wrong before, since rates don’t always move in ways that make sense.

Realtor, TBWS

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