Mortgage rates rise as eyes turn to next Fed rate hike

Mortgage rates continue to rise, softening the demand for new homes

Mortgage rates are up once again as the housing market prepares for the Fed to raise rates.  (iStock)

Mortgage rates increased once again this week as the market prepares for another interest rate hike after the Federal Reserve’s meeting later this month. 

The 30-year fixed-rate mortgage average rate increased to 5.54% for the week ending July 21, 2022, according to Freddie Mac’s Primary Mortgage Market Survey. This was up from last week when the average 30-year mortgage rate averaged 5.51% and from last year when it averaged just 2.78%. 

The average 15-year mortgage rate increased to 4.75%, according to Freddie Mac. That's up from 4.67% last week and from 2.12% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) decreased slightly to 4.31%, down from 4.35% last week but up from 2.49% last year. 

"All eyes are on next week’s meeting of the FOMC, with markets widely anticipating another 75 basis point hike," George Ratiu, manager of economic research, said in a statement. "The big question is whether 75 basis points will be enough, or if the Fed should push for a 100 basis point increase." 

If you are interested in taking advantage of mortgage rates now before they move higher, consider taking out a mortgage refinance to lower your monthly payments and save money over the life of the loan. Visit Credible to find your personalized interest rate without affecting your credit score.


More rate hikes to come as inflation rises

Inflation surged in June to a new 40-year high, marking the fifth time it's broken that record this year.

Because inflation remains high, the Federal Reserve is likely to continue raising rates in an attempt to bring it back down, likely driving mortgage rates higher in the weeks to come. The Fed recently released the minutes from its June meeting, showing that another 75-basis point rate hike could be on the table at its Federal Open Market Committee (FOMC) meeting next week.

"Markets are taking the [Federal Reserve’s] remarks with a grain of salt in light of the central bank’s missed signals on inflation last year," Ratiu said. "The bank argued for the better part of 2021 that inflation was ‘transitory,’ and likely to recede once the supply chain bottlenecks were resolved, only to admit earlier this year that aggressive policy action was needed to remedy accelerating prices."

Now, concern is growing that even the Fed’s rate setting will not be enough to tamper inflation.

If inflation is hurting you, consider refinancing your mortgage in order to reduce your monthly payment amount. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.


Homebuyers less eager to enter housing market

As consumers grow more cautious about the housing market and the economy overall, it is beginning to take its toll on the demand for homes. 

"The housing market remains sluggish as mortgage rates inch up for a second consecutive week," Freddie Mac Chief Economist Sam Khater said. "Consumer concerns about rising rates, inflation and a potential recession are manifesting in softening demand. As a result of these factors, we expect house price appreciation to moderate noticeably."

At today’s average mortgage rate for a 30-year mortgage, the monthly mortgage payment on a median-priced home is $2,100, up 59% from last year due to rising home prices and interest rates.

"Not surprisingly, this week we saw mortgage demand drop to the lowest level in 22 years and sales of existing homes decline for the fifth straight month, as buyers paused their home shopping," Ratiu said.

If you are looking to buy a home in today’s market or refinance your current mortgage loan amount, consider using an online marketplace to compare multiple lenders and comparison shop for the best rate. Contact Credible to speak to a home loan expert and get all of your questions answered.

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