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Why Are Mortgage Rates So High, and How Long Will They Stay Up?
Economists say loan rates are affected by a complicated combination of factors, but there are tactics consumers can use to land a lower rate.
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Mortgage rates are running at a 22-year high, crimping a housing market already squeezed by high prices.
Home buyers face an average rate of 7.23 percent on a 30-year fixed-rate mortgage, the most popular home loan in the United States, Freddie Mac reported on Aug. 24. That was the highest rate since June 2001.
The rise in rates has cooled demand for homes, with sales of existing homes down sharply from last year. And sellers who locked in low rates during the pandemic are reluctant to put their homes on the market because they fear they will not be able to find a comparable rate when they become buyers.
Mortgage rates are influenced by a number of factors, most beyond our control. The biggest driver is the bond market, but there’s more to it than that, said Melissa Cohn, regional vice president at William Raveis Mortgage, a real estate lender.
recently forecast that the average 30-year mortgage rate would fall to 5 percent by the fourth quarter of next year.
Fed officials have acknowledged that they will need to take into account the potential economic costs of raising rates, and Mr. Yun said that included damage to regional banks, like the collapses of Silicon Valley Bank and Signature Bank.
What can a buyer do to get a lower rate?
It may seem that home buyers have little wiggle room, but there are things they can do to nab a lower rate, Ms. Cohn of William Raveis Mortgage said.
A strong credit score is important, she said, as well as a sizable down payment, usually at least 20 percent of the purchase price. Buyers who can manage that may find that they are in a less competitive market, which could make it easier to close a deal.
“Rates should be lower in the next 12 to 24 months,” Ms. Cohn said, and home buyers can refinance their mortgage when rates drop.
She also advises consumers to compare rates from multiple lenders. “There are no magic tricks,” she said. “You need to shop around.”
Gregory Schmidt covers breaking news and real estate and is the editor of the Square Feet column. More about Gregory Schmidt