Current Mortgage Trends: Are Mortgage Rates Going Down?
Good news for borrowers: The wait for lower rates may soon be over. As inflation slows and the economy cools off, mortgage rates have been trending down, and they’re expected to fall further in the coming months and years.
The not-so-good news: Rates probably won’t go back to the historic lows we saw in 2020 and 2021. And once rates fall, homebuyers will likely have other challenges to contend with, including increased competition and rising home prices.
Understanding mortgage rates and their impact on the housing market
Mortgage rates fluctuate from day to day and even hour to hour, and where mortgage rates are currently trending can have a major impact on homebuying demand.
When mortgage rates are low, homebuying demand typically goes up. Low rates boost buying power and make it easier for potential buyers to afford a home purchase. However, an increase in demand can put upward pressure on home prices, erasing some of that benefit.
High mortgage rates typically have the opposite effect on demand. Because getting a mortgage becomes more expensive, many buyers drop out of the market to wait for rates to go back down. This can help keep prices from rising too much, but that’s not always the case.
As home prices rose to record highs in 2022 and 2023, many would-be home sellers chose to stay in their homes rather than sell and have to give up their historically low mortgage rates. This phenomenon, deemed the “lock-in effect,” constrained housing supply and pushed prices up, since there weren’t enough homes on the market to meet buyers’ needs.
Factors influencing mortgage rates
Mortgage rates are determined by a number of different economic influences, including investor demand for mortgage-backed securities, the current rate of inflation, Federal Reserve policy, and even geopolitical uncertainty.
In general, mortgage rates tend to go up when the U.S. economy is doing well or growing quickly, while slowing growth or a recession can push rates down.
Rates also vary by state, so where you live can determine how much you’ll pay to get a mortgage. Your individual financial profile, including your credit score, down payment, and debt-to-income ratio, will help determine the exact rate you get as well.
See more at…https://www.businessinsider.com/personal-finance/mortgages/will-mortgage-rates-go-down-this-year