The cost of borrowing money has increased significantly in the last few months, making life more expensive for people with mortgages and other loans. Interest rates on mortgages are now more than 2% higher than they were at the beginning of the year, after rising by a record amount during the first three months of 2018.
Current Mortgage Trends
Inflation is one of the main reasons why interest rates are expected to go up. In June, the consumer price index rose 9.1% compared to the previous year, which is the biggest increase since 1981. Another factor is the Federal Reserve. The central bank started increasing the benchmark interest rate in March, and in July they raised rates by 75 basis points. This is the second time this year that the Fed has raised rates by such a large amount. The last time this happened was in 1994.
The Fed’s efforts to raise interest rates in order to combat inflation are causing financial difficulties for both consumers and businesses. The US Federal Reserve’s decision to raise interest rates will have a two-fold effect on mortgage rates. While higher interest rates will make mortgages more expensive, the slowing of economic growth will also lead to lower mortgage rates. Analysts predict that mortgage rates will settle at around 5.2% by the end of the year.
The average rate for a 30-year, fixed-rate mortgage was 5.81% in late June, but has since decreased to 5.30% as of July 28, according to Freddie Mac. This is still nearly double the rate compared to 2.8% a year ago.
The Federal Reserve has added an extra $10 billion to its program to buy Treasurys in order to keep inflation under control. By increasing the amount of money in the economy, the Fed hopes to lower interest rates and encourage economic growth.
The Fed’s program to buy Treasurys — which is aimed at driving down interest rates — is known as “quantitative easing.”
Last week, the government’s consumer price index rose just 0.1% in June, its smallest increase in a year. It’s a sign that inflation is easing, which is key to the Fed’s monetary policy decisions.
The Fed’s move comes as the economy is showing increasing signs of a slowdown. Real gross domestic product increased at a 1.9% annual rate in the first quarter, according to the government’s most recent estimate.
The Fed expects the economy to expand by 2.0% to 2.3% this year. That’s down from its previous forecast of 2.4% to 2.9% growth.
The Bottom Line
It is clear that mortgage rates are still near historic lows, and they are expected to remain low for the foreseeable future. This is good news for anyone considering buying a home or refinancing their existing mortgage.
Contact Your Mortgage Specialist Today!
Now is a great time to take advantage of low mortgage rates and save some money on your monthly payments. If you have been thinking about buying a home or refinancing, now is a good time to act.
Mortgage City is a licensed mortgage lender offering help to those looking to get a mortgage to buy their dream homes. Contact us today at (248) 930-8709 and get the mortgage you need today!
