Mortgage rates are quickly rising in anticipation of the central bank’s action, with the average rate on a 30-year loan now at 3.92%, up from a level of 3.69% last week. The last time mortgage rates were higher was in May 2019, about a year before the pandemic struck and led the Fed to slash interest rates to near-zero levels.
She said mortgage rates could push as high as 4.5% by the end of the year, which makes a big difference in terms of housing affordability. For instance, just a 1-percentage-point change can increase monthly mortgage rate payments by hundreds of dollars. The Fed is expected to hike interest rates several times this year, although exactly how many is still unknown. Despite the likely aggressive pace and scale of the hikes, they will not result in inflation immediately dropping. That means inflation will likely remain stubbornly high throughout the year, causing even more financial strain for those who are facing higher mortgage rates.
While home sales and mortgage rates are up, home prices are also skyrocketing given the high demand and scarcity of homes.