Mortgage Rate Update – Rates Reverse the Downward Trend and Tick Up

By Douglas Katz – 07/15/2022

From Freddie Mac:

Mortgage rates are volatile as economic growth slows due to fiscal and monetary drags. With rates the highest in over a decade, home prices at escalated levels, and inflation continuing to impact consumers, affordability remains the main obstacle to homeownership for many Americans.

Highlights and Takeaways:

  • Inflation came in at 9.1% through June which increases the likelihood of a rate increase by the Federal Reserve.  Early predictions are for up to 1% increase which would be both impactful and unprecedented.  Although not directly impacting mortgage rates, this will have some effect and the change may come BEFORE the announcement as mortgage lenders adjust pricing in anticipation of the move.
  • The number of cancelled deals has begin to rise with the rate increases and uncertainty in the housing market. At last measure it was up to 15% and higher rates may further bump the deal cancellation rate higher.  This is again opportunity as sellers may become more incented to negotiate after a deal falls through.
  • More and more is being reported on at risk markets as opposed to the hottest markets.  More often than not, these markets are not going to tank, but rather slow as they transition to a more traditional market.
  • If financing, keep vigilant for changes in the lending programs.  These can be positive as lenders try to make products more flexible to meet a tougher market for borrowers, but it can also be negative as lenders balance the risk of borrowers weakened financial pictures due to inflation, rate increases and still expensive housing stock with low inventory.