![]() With mortgage rates likely to stay higher for longer, affordability remains a top concern among would-be homebuyers.Ī good rule of thumb is that you shouldn’t spend more than 30% of your gross monthly income on housing. Policy changes from the Fed affect mortgage rates somewhat, but there’s a variety of factors that contribute to mortgage rate movement, namely inflation, employment data and the broader outlook for the economy. “Looking ahead, nearly all committee participants see it as likely that some further increases will be appropriate to bring inflation down to 2% over time,” said Fed Chair Jerome Powell at a June 14 press conference. The Fed hasn’t ruled out additional rate hikes in the future, but says it will make those decisions on a meeting-by-meeting basis in response to incoming economic data. The central bank’s decision to skip a rate hike on June 14 marks the first pause in its current rate-hiking cycle since March 2022. This comes after the most recent Consumer Price Index showed inflation at 4.0% for the period ended in May, down from 4.9% in April. What to know firstĪt its June meeting, the Federal Reserve left its federal funds rate untouched at a range of between 5.00% and 5.25%. ![]() ![]() Here’s what you need to know about mortgage rates, how they work and how to find the best deal for you. If you’re in the market for a mortgage, it’s always important to compare offers from a variety of lenders to find the lowest rates and most amenable loan terms. “Mortgage rates will continue to ebb and flow, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” said Jacob Channel, senior economist at loan marketplace LendingTree. Inventory is likely to remain an issue until mortgage rates dip closer to, or below, 6%, but it’s difficult to predict when that will be. So, even if you can afford to purchase a home in today’s market, you can’t buy what’s not for sale. New listings of homes for sale fell by 25% from last May, according to real estate brokerage Redfin. The combination of elevated mortgage rates and low inventory propping up home prices is putting a damper on what is usually a hot market in the spring and summer. High mortgage rates have significantly lowered the amount of for-sale inventory as millions of homeowners are reluctant to give up the bargain-bin mortgage rates they locked in during the pandemic. But at the moment, things are at a standstill. By making it more expensive to borrow money, demand for buying property should go down, and prices with it. In effect, this is what the Federal Reserve is trying to fix by raising rates over the past year to bring down inflation. The same survey shows 82% of Americans believe the country is facing an unprecedented affordability crisis. Sixty-one percent of Americans who have never purchased a home said they don’t think they’ll ever be able to afford to, according to a recent survey of home buying sentiment from Credit Karma. It will stay that way until prices or mortgage rates drop and the market comes back to balance. High prices and elevated mortgage rates are pushing home buying out of reach for many Americans, particularly first-time homebuyers.
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