Three prospective mortgage interest rate scenarios that lenders predict may materialize during the summer season.
Here's a fresh take on the topic:
Summer's almost here, and the mortgage rate scene is causing quite a buzz, isn't it? Although inflation's cooling off from its peak, it's still higher than the Fed's 2% target, leaving the Fed in a tricky situation when it comes to the rate environment. As a result, mortgage rates have been lingering in the high 6% range, keeping plenty of potential homebuyers on the sidelines. So, what's the lowdown on whether the mortgage rate climate will change? Let's dive in.
Without any major labor or inflation surprises, industry experts believe we'll be in that darn middle ground, hovering around 6.875% to 7.125%. That's the word from Nicole Rueth, a Denver Metro Association of Realtors market trends committee member and founder of The Rueth Team. And Debbie Calixto, sales manager at mortgage lender loanDepot, agrees: minor fluctuations might occur, but overall, mortgage rates are likely to stay put in the high 6% range.
The most optimistic prediction comes from Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad. He thinks that by August, we might see a modest decline in 30-year fixed mortgage rates, averaging around 6.6%.
Three Possible Mortgage Rate Scenarios
Although mortgage rates might change over time, don't expect any major swings this summer. Here's what the experts have to say about the rate scenarios we could face:
1. Rates Staying Put
For mortgage rates to remain the same, economic conditions need to stay more or less where they are. Slight market and economic fluctuations can happen, as long as nothing major pushes things in a positive or negative direction.
According to Phil Crescenzo Jr., vice president of the Southeast Division of Nation One Mortgage Corporation, if inflation drifts sideways, the job market stays dented but hanging on, and the fed keeps waiting for clarity, mortgage rates won't have a reason to move dramatically.
2. Rates Heading Up
For mortgage rates to rise, several economic shifts would need to happen: inflation climbing above 3%, the economy growing too fast (unemployment dropping below 4% or GDP growth exceeding 3.5%), or the 10-year Treasury yield rising to 4.7% or higher as investors worry about inflation or government spending. This would mean higher monthly payments and reduced purchasing power in an already tough market.
3. Rates Dropping Slightly
For mortgage rates to decline, the economy needs to show signs of cooling. A real pivot moment – like a clear, sustained drop in inflation or a crack in employment that forces the Fed to cut rates sooner than expected – would be needed. If rates begin to fall, expect increased competition as sidelined buyers quickly return to the market, which might lead to a revival of bidding wars and rising home prices, negating some of the savings from lower mortgage rates.
The Bottom Line
Although significant mortgage rate changes are unlikely this summer, other scenarios could still unfold. Instead of trying to time the market to perfection (which can lead to lost opportunities), experts recommend focusing on other variables you can control, such as negotiating rate buydowns, exploring different loan programs, or locking in a rate as soon as you find a home that fits your budget and needs.
And remember: while rates might drop, home prices probably won't. So don't let the opportunity to build equity slip away!
Sharon Wu Sharon Wu, a seasoned writer with over a decade of experience, specializes in consumer-focused content covering home and finance topics, including insurance, investments, credit, debt, mortgages, and home security.
- With the ongoing economic uncertainty and high mortgage rates, it's crucial for personal-finance enthusiasts to stay updated on news regarding interest rates and the overall finance landscape, as it can impact their home-buying decisions.
- Despite the possibility of slight fluctuations, industry experts predict that the mortgage rate climate will primarily remain in the high 6% range this summer, potentially affecting the ability of many potential homebuyers to secure favorable financing for their homes.
