Mortgage rates in the United States have hit their highest level since November 2023, a problem that is expected to worsen as the Fed struggles to combat stubbornly high inflation.
The average 30-year fixed-rate mortgage in the United States touched 7.50% on Tuesday, marking the highest rate in five months, data from Mortgage News Daily shows.
Although the average 30-year rate dropped to 7.41% on Thursday, it is not expected to fall much further. Realtor.com’s chief economist, Danielle Hale, said the average 30-year fixed mortgage could hit 8% if the U.S. Central Bank continues to hold interest rates steady.
“A lot will depend on how the next couple of inflation readings come in,” said Hale, per Realtor.com. “If inflation goes down, mortgage rates will start to ease back down.”
As reported by The Dallas Express, U.S. inflation was up 3.5% year over year in March, well above the Fed’s 2% target. Fed Chair Jerome Powell has reiterated that policymakers are unlikely to lower rates until data suggests that inflation is reliably moving toward the 2% goal.
“We’ll need greater confidence that inflation is moving sustainably towards 2% before [it will be] appropriate to ease policy,” Powell said Tuesday during a policy forum focused on U.S.-Canada economic relations. “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence.”
Freddie Mac’s chief economist, Sam Khater, suggested that the mix of inflation and high interest rates has caused many people to pause their homebuying plans until after conditions have improved.
“As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year,” he said in a statement to CNN.
According to Realtor.com, the national median home price in March was $424,900, or 0.2% higher than the previous month. If a homebuyer puts down 10% on a 30-year mortgage, a Bankrate Mortgage Calculator shows that their average monthly payment would be about $2,700.
Although housing costs continue to soar across the United States, Hale does not anticipate the same spike in home prices as in 2023.
“We’ll see the usual climb from spring into summer, but I don’t think we’ll see a big jump over prices one year ago since many homebuyers are already at the edge of their budgets,” she said, per Realtor.com.