Have mortgage rates peaked? Here's what some experts think
In late July, the Federal Reserve announced another hike to the Federal Funds Rate — the 11th since March 2022 — increasing the rate to 5.33%. The key interest rate level is now the highest it's been in 22 years.
While there are signs that the recent Fed rate hikes may have helped cool inflation, they've also driven up mortgage rates — with 30-year mortgage rates at 7.12% as of August 11, 2023. This has caused many homeowners and potential homebuyers to pause their borrowing plans.
But how much higher will mortgage rates go? Here's a look at what experts say about the future of mortgage rates and whether they've peaked.
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Have mortgage rates peaked? What the experts think
Mortgage rates have been trending upward over the past few weeks, inching above 7% for 30-year mortgage loans. And experts say that, unfortunately, rates aren't likely to come down quite yet.
"Mortgage rates will remain stubborn," says Glenn Brunker, president of Ally Home. "As a result of continued strength in the labor market and the consumer, mortgage rates still reside around 7% levels."
"As inflation shows signs of weakening in August, mortgage rates should remain stubbornly in the high six to low seven percent range through the rest of the month," Brunker adds.
Brian Shahwan, mortgage banker and broker at William Raveis Mortgage, agrees that we may not be experiencing the peak yet.
"Mortgage rates may continue to climb as we combat inflation for the remainder of 2023, then sharply decline in early 2024," Shahwan says.
But what will the turning point be?
"Once the Fed relaxes rate hikes, we'll see mortgages take a modest downturn. Some sources predict that rates will gradually level off as soon as August, but the Fed's next meeting in September may have a larger impact," says Jake Hill, CEO of DebtHammer.
"Until consumers really start to feel the effects of the Fed hikes, in terms of their credit card debts, personal loans, auto loans, etc., will we see the economy begin to enter a recession period with mortgage rates quickly dropping," Shahwan adds.
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Does it make sense to buy a home or refinance now?
Elevated mortgage rates don't necessarily mean you should hold off on buying a home or refinancing. However, the right answer will depend on your situation.
"I like to say, you marry the house and date the rate, because you can always refinance when rates come down, but you can't always find the same property," says Shahwan. "For those [who] have liquidity to sustain a higher payment for the next six months and need to move in the near future, now is still a great time to purchase."
Brunker notes that timing the market can put homebuyers at a disadvantage because it delays their time to build home equity.
"If you're financially ready, I say act now. If you think your personal finances are not up to par for homeownership, work on stabilizing your financial situation first," he adds.
Refinancing your mortgage can be a different story, however, as it only makes sense when you stand to gain a financial advantage.
"It all depends on the borrower's specific scenario. It may not make sense for a borrower with a low rate to refinance now, unless they had to for financial reasons, or if their ARM lock period was up," says Shahwan.
The bottom line
Mortgage rates have been climbing in recent weeks, and experts think we may experience the peak between now and the end of the year. However, whether that happens hinges on factors such as additional Fed rate hikes and consumer spending trends.
In either case, if you find your dream home and can afford the payments despite the elevated rates, it may still make sense to buy and then refinance later when the rates drop.
