Will mortgage rates go up in July?

The mercury in your thermometer is rising and mortgage rates are also rising, creating an uncomfortably hot and sticky situation for potential buyers.

Currently, the benchmark 30-year fixed mortgage rate is approaching 6%. That’s a big jump from rates 12 months ago, when the average 30-year fixed-rate mortgage could be had for just over 3%.

If you’re sweating that jump, you’re not alone. Here are the expert opinions on what to expect for mortgage rates this month and later this year.

July Mortgage Rate Forecasts

In the short term, don’t expect much relief in the form of lower rates this month. You can thank inflationary pressure for that.

“Inflation issues persist, so expect mortgage rates to rise a bit from current levels,” says Greg McBride, chief financial analyst for Bankrate. “The 30-year fixed rate will hover around 6%, and the 15-year fixed rate around 5.1%, in July.”

“I think mortgage rates will remain relatively stable over the next month, with rates on the 30-year mortgage between 5.75% and 6%, and rates on the 15-year mortgage hovering around 5 %,” said Rick Sharga, executive vice president. President of Market Intelligence for ATTOM Data Solutions. “Rates have risen much faster than most industry analysts and economists initially expected. They may ease over the next few weeks as the market learns about the impact of Federal Reserve actions on the inflation and the economy in general.

Still, rates could exceed 6%, says Nadia Evangelou, forecasting director for the National Association of Realtors (NAR). They did so briefly before the Federal Reserve’s rate hike announcement in June, but have since backtracked. The next Fed meeting and rate decision will be at the end of this month.

“Mortgage rates will exceed 6% in July,” says Evangelou. “While inflation will continue to exceed 8%, the Federal Reserve will raise short-term interest rates again by 75 basis points this month. These two factors will push mortgage rates even higher. So, I expect the 30-year fixed mortgage rate to average around 6% and the 15-year fixed mortgage rate to average around 5.1% in July.

Higher mortgage rates ahead

At the end of the third quarter of 2022, there will probably be no rate cuts, thanks in part to the Fed’s efforts to fight inflation. Although Fed decisions do not directly affect fixed mortgages, there is a ripple effect in the mortgage market. Between July and September, expect rates to continue rising, albeit more slowly, with averages between 6% and 6.25%, Sharga says — of course, barring major trend reversals.

“As we enter the fourth quarter, it would not be surprising to see slightly higher rates, perhaps between 6% and 6.25% for 30-year loans and between 5% and 5.25% for 15-year loans,” says Sharga. “The most likely scenario appears to be that the Fed will need to continue to raise the fed funds rate to control inflation and will continue to unwind its position in the mortgage-backed securities market. Both of these actions will put pressure on the rise in mortgage rates.

The ongoing conflict in Ukraine also continues to compound the problems.

“The war in Ukraine continues to add to inflationary pressures, making it even more difficult for the Fed to slow inflation,” Evangelou said.

If consumer prices were to cool, however, there is a chance that rates could fall lower than expected.

“As we begin to see lasting and unequivocal evidence that inflation has peaked and a rapidly slowing economy, mortgage rates could come down quickly,” McBride says. “They won’t come back to 3%, but we could see a reversal of some of the rapid rise seen so far in 2022.”

For now, Evangelou’s outlook is for rates to rise even further in the second half of 2022 – but “I don’t expect to see the same big increases the market saw in March and April. Mortgage rates will continue to rise, but at a slower pace. This is because rates already seem to have priced in some of the effects of the Fed’s upcoming rate hikes.

When the Federal Reserve raised short-term interest rates in March, mortgage rates jumped about 80 basis points over the next three weeks, Evangelou says. Consequently, the 30-year fixed mortgage rate rose from 3.85% to 4.67% at the end of March.

However, when the Fed raised rates more aggressively in May, mortgage rates only jumped less than 20 basis points, eventually falling to 5.1% at the end of May.

“So the data shows that the effect of the Fed’s rate hike on mortgage rates was smaller in May than in March,” says Evangelou. “Therefore, I expect the 30-year fixed mortgage rate to be near 6.2% at the end of September, possibly climbing to 6.5% by the end of the year.”

Besides inflation and the Fed’s response, keep an eye on bond yields, Sharga says. The bond market has been more volatile than usual in recent weeks, with 10-year US Treasury yields jumping to 3.49% in mid-June before falling back to just over 3%. Since the 30-year mortgage is closely tied to 10-year US Treasury yields, another spike could lead to higher mortgage rates.

What is the right decision now?

If you’re a first-time home buyer, your buying power is at stake, but that doesn’t mean you should join the fray.

“With affordability stretched to the extent that it is due to soaring home prices and the highest mortgage rates in 13 years, first-time home buyers may be better off waiting than buying. ‘adventure too far on their skis,’ says McBride. “Young upwardly mobile buyers could see their incomes rise faster than house prices over the next two to three years, giving them better access to home ownership in a more balanced market.”

However, “if you find a house you can afford, it’s probably still a good time to take the plunge,” says Sharga. “If mortgage rates drop in a year or two, there’s always a chance you could refinance at a lower rate then.”

A bright spot? There are about 75,000 more homes available for sale today for buyers earning $200,000 or more, with inventory up 13% since January, according to NAR.

“While it’s promising to see more homes available on the market, more entry-level homes are needed,” says Evangelou. “The fact remains: higher mortgage rates hurt affordability, and middle-income homebuyers can afford to buy fewer homes. Compared to the start of the year, buying a home now costs about $800 more each month. Nearly 20% of households no longer earn the qualifying income needed for a median-priced home.

For homeowners who still have the idea of ​​a refinance, you may have to sit on the sidelines for now.

“There are probably very few borrowers who would benefit from refinancing at today’s rates,” says Sharga, “but tapping into your capital to pay off higher interest rate debt – including debt credit card – or making improvements to a home are valid reasons for someone currently considering a refinance loan or even a home equity line of credit

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