Mortgage rates reach 8%: When will they start decreasing according to experts?
Mortgage rates have reached 8%, further limiting the options of potential home buyers. Will relief be coming? What do experts have to say about the matter?
Over the past two years, mortgage rates have been on the rise, and average rates on 30-year fixed-rate mortgages have now hit 8%. This comes after rates dropped to historic lows during the covid-19 pandemic. Back then, measures implemented by the Federal Reserve to pump liquidity into the market to stave off economic ruin also helped drive rates into sub-three-percent territory. In turn, that allowed for a buying frenzy and bidding wars which pushed home prices sky-high.
Since early last year, the US central bank has been tightening monetary policy including raising interest rates to rein in inflation. While not directly related to one another, as the fed funds rate has risen, so too have mortgage rates. The 8% average rate as of Oct. 18, 2023 is more than double the average rate of 3.72% in January 2020.
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Americans feel trapped by low-rate mortgages
Elevated mortgage rates have kept millions of homeowners who locked in far lower rates from considering selling, thus crimping an already tight supply in the market and sustaining the high home price levels. Coupled with high rates, many would-be homebuyers have been pushed out of the market and those still shopping have seen what they can afford on their budgets reduced.
READ ALSO: Low housing inventory in the United States is leading to higher prices
Mortgage rates reach 8%: When will they start decreasing according to experts?
Fortunately, there may be some relief coming in the future. The latest inflation data show that the Fed’s interest rate hikes may be having the desired effects with inflation dropping. While still above policymakers’ target of 2 percent and the latest headline numbers slightly exceeding expectations, the Fed isn’t predicted to increase the US central bank’s interest rate at the next meeting to determine policy.
There is no consensus on how fast nor how far mortgage rates will fall, but experts agree that 2024 will see lower interest rates for home loans. By the end of next year home shoppers could see anywhere between 6.3 percent down to 5.4 percent according to expert mortgage rate watchers. One senior economist at Morningstar is forecasting a decline to the range of 4.5 percent by 2025.
However, in the short term mortgage rates are unlikely to come down significantly says Chen Zhao, head of the economics team at Redfin. However, with the realization that mortgage rates are not going down anytime soon, some homeowners with low mortgage rates aren’t waiting any longer and are beginning to list their homes. If priced right, they are attracting buyers due to historically limited supply.