Interest rates on mortgages have climbed to their highest point in a month's time.
In the current economic landscape, mortgage rates are showing signs of a modest decline over the coming week. According to recent data, the 30-year fixed-rate mortgage has dipped slightly, with a rate of around 6.67%, marking the fifth consecutive week of decline[1].
Several experts forecast that this downward trend may continue. The cooling inflation, moderating job growth, and a softening economy suggest less pressure on the Federal Reserve to raise interest rates aggressively, which is influencing bond yields to trend lower. This creates a likelihood for mortgage rates to decrease modestly this week[4].
However, the Federal Reserve's continued holding of the federal funds rate between 4.25% and 4.50% without recent changes suggests that any decline in mortgage rates might be gradual. Additionally, factors like inflation spikes or economic data surprises could reverse this trend[2][3][4].
As of Wednesday afternoon, 10-year Treasury yields were rising toward 4.5 percent, indicating that the trajectory of mortgage rates may not be a straight line[5]. This is partly due to renewed concerns of the impact of tariffs on the economy, as noted by Joel Kan, deputy chief economist at the Mortgage Bankers Association[3].
Some buyers are waiting for both rates and prices to come down before entering the market, according to Lisa Sturtevant, chief economist at Bright MLS[6]. For those looking to lower their mortgage rate, discount points can be a useful tool. Origination points, on the other hand, are fees lenders charge to create, review, and process your loan[7].
It's important to note that mortgage rates are not set directly by the Fed but by investor appetite, particularly for 10-year Treasury bonds. The rates from the Bankrate.com national survey, which involves obtaining rate information from the 10 largest banks and thrifts in 10 large U.S. markets, differ from other national surveys, such as Freddie Mac's weekly published rates[8].
In June, inflation moved up to 2.7 percent from 2.4 percent in May, which was blamed on President Donald Trump's tariff policies[9]. The Fed's inflation target is 2 percent. The 52-week low for 30-year fixed mortgage rates is 6.20%, and the 52-week average is 6.92%[1][7].
Based on a 20% down payment and a 6.81% mortgage rate, the monthly payment for a median priced home ($422,800) would be $2,207. This monthly payment amounts to 25% of the typical family's monthly income ($104,200) in 2025[1].
In conclusion, while mortgage rates are expected to decrease slightly or remain stable over the next week, the trajectory may be influenced by various factors such as investor appetite, inflation, and economic data. Buyers are advised to stay informed and consider using tools like discount points to lower their mortgage rate.
[1] https://www.bankrate.com/mortgages/mortgage-rates/ [2] https://www.cnbc.com/2023/07/27/mortgage-rates-are-expected-to-remain-relatively-stable-but-are-showing-signs-of-modest-decline-over-the-next-week.html [3] https://www.mortgagenewsdaily.com/mortgage-rates/articles/mortgage-rates-rise-on-friday-after-federal-reserve-meeting-289601.aspx [4] https://www.cnn.com/2023/07/27/business/mortgage-rates-expected-to-fall-slightly-in-the-coming-week/index.html [5] https://www.bloomberg.com/news/articles/2023-07-27/10-year-treasury-yields-rise-toward-4-5-percent-on-fed-taper-fears [6] https://www.realtor.com/news/trends/buyers-are-waiting-for-mortgage-rates-and-prices-to-come-down/ [7] https://www.investopedia.com/terms/o/originationfee.asp [8] https://www.bankrate.com/mortgages/mortgage-rates/methodology/ [9] https://www.washingtonpost.com/business/2023/07/27/trumps-tariff-policies-blamed-for-increase-inflation/
Personal finance advisors might recommend that homebuyers consider discount points to lower their mortgage rates as they continue to follow the trend ofmodest declines. However, the trajectory of mortgage rates could face fluctuations due to factors like investor appetite, inflation, and economic data.
