(TheLibertyRevolution.com)- If you are looking to purchase a new home or refinance your existing mortgage, now is not the best time to do so, at least based on current mortgage rates.
On Wednesday, the Mortgage Bankers Association released updated data that showed the average interest rate for America’s most popular type of loan increased to the highest level it’s been at since back in 2001.
This could be considered a double whammy for the housing market, as the continued tightening of various financial conditions are starting to affect the housing market as a whole.
According to the MBA data, the average rate for a 30-year fixed-rate mortgage increased all the way to 7.16%, a 22-basis point increase, for the week that ended on October 21. In addition, the Market Composite Index that the MBA compiles dropped 1.7% from the week before. That index measures the volume of loan applications for mortgages.
Total applications for mortgages have also dropped to the slowest pace since back in 1997.
Just since the beginning of 2022, mortgages rates have more than doubled. The Federal Reserve Bank has been very aggressive in increasing interest rates to try to stamp out runaway inflation. The moves by the central bank haven’t worked to lower prices yet, but they have significantly impacted mortgage interest rates and, as a result, affordability of homes.
Many economists believe that the Fed will once again increase interest rates by another 75 basis points when they meet again from November 1 to November 2. It would mark the fourth straight meeting that the central bank has taken that unprecedented action.
While 30-year fixed-rate mortgage interest rates aren’t tied directly to the Fed’s benchmark rate, they still have increased substantially this year based on the fact that the yield on 10-year notes have increased as well.
As a result of the steep increase in mortgage rates, the MBA has a rather negative outlook for the housing market as a whole. Recently, Mike Fratantoni, who serves as the chief economist at the MBA, said:
“We’re now forecasting a hard landing rather than a soft landing.”
What he’s referring to is the prediction that the housing market bubble is likely to pop, with home prices crashing down rather than slowly but surely declining.
Over the last few years, thanks to many effects that came out of the COVID-19 pandemic, home prices across the country soared to new heights. There were far more buyers on the market than there were homes, leading to not only significant increase in prices but a significant decrease in the amount of time homes typically spent on the market.
But, thanks to a huge outlay of cash from the federal government to try to help people through the pandemic, prices began rising at out-of-control rates. That led to the Fed increasing interest rates to try to stamp out inflation — which came much too late — while has led to soaring mortgage rates in 2022.
Many financial experts believe that while the 7.16% average interest rate right now is bad enough, further increases to 8% are more are likely in the near future.