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BALTIMORE — The painful environment for Baltimore homebuyers continues: Mortgage rates surged above 7% last week following the latest quarter-point rate increase from the Federal Reserve. And that’s not all: The Fed signaled that this might not be the last rate hike of this cycle after all, despite earlier predictions to the contrary.
Video above: Inflation remains major concern for Federal Reserve
This most recent Fed rate hike brought the benchmark borrowing rate — that is, the interest on lending between banks — to 5.25%-5.5%. That’s its highest level in 22 years.
The Fed has raised the federal funds rate 11 times in the past 17 months in its attempt to bring inflation under control. The moves appear to be working: There have been positive economic signals in recent weeks regarding both consumer prices and the labor market. But Fed Chair Jerome Powell cautioned that officials don’t want to give too much weight to a single month of data.
So, what does that mean for you? When the federal funds rate goes up, interest rates on products like mortgages tend to go up, too. And, since the Fed indicated it’s weighing another hike in September, mortgage rates will likely stay high for a while longer.
As it stands, the average for a 30-year fixed-rate mortgage is 7.05%, while the average 15-year fixed-rate mortgage is at 6.40%, according to Mortgage News Daily. The average for a jumbo mortgage stands at 7.10%, and the average for a 5/1 ARM, meanwhile, is 6.95%. Nonetheless, it is possible to find better mortgage rates by considering offers from various lenders, springing for discount points, and improving your credit score.
Baltimore housing market trends
The market is particularly competitive for single family homes and condos in Baltimore right now. Even though inventory remains tight, prices are either up or stable pretty much across the board, thanks to bidding wars over the few properties that do go on the market.
In June (the most recent month with complete data), the median sale price for houses was up 1.9% from 2022, while the median for condos was up 1.8%, according to Redfin. The median price for Baltimore’s iconic rowhouses, on the other hand, was flat, sticking at $215,000 year over year (note that the data includes other types of dwellings that are considered townhouses, too).
Redfin gives the city of Baltimore a “Compete Score” of 67 (with 100 being the most competitive score) right now. For comparison, Bowie has a Compete Score of 78 and Washington, D.C., has a Compete Score of 55. Homes are selling, on average, for 1% above list price, with homes in the hottest neighborhoods regularly selling for 3% above list price.
National housing market trends
Home prices are up 2.6% year-over-year, according to Redfin’s latest housing market report — the largest increase since November. Inventory not only remains incredibly tight, it’s also falling especially fast: It shrunk 17% over July 2022, the biggest drop in 18 months.
Mike Fratantoni, senior vice president and chief economist with the Mortgage Bankers’ Association, expressed optimism that things could turn around later in 2023, if this ends up being the last rate hike.
“While the market for new home sales has recovered considerably over the past few months, the pace of overall housing market activity remains quite slow,” Frantantoni said. “We do expect mortgage rates to trend down once the FOMC clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks.”
Ready to move on anyway? Many real estate pros are dredging up the old adage, “Date the rate, marry the house.” Translation: If you see your dream home now, you don’t necessarily have to pass it by while waiting for a better mortgage rate in the future. Consider taking out a mortgage now knowing that you’ll refinance once rates drop.
Just a three-quarter point drop is enough to make refinancing worth it. And, as you look for the best possible rate right now, make sure you compare offers among multiple lenders. Just getting quotes from four lenders can save you up to $1,200 every year on your mortgage, according to a study by Freddie Mac.
30-year fixed mortgage interest rates
On average, the interest rate for a 30-year mortgage on July 31 was 7.05%, up from 6.99% on July 24.
15-year fixed mortgage interest rates
On average, the interest rate for a 15-year mortgage on July 14 was 6.40%, up from 6.35% on July 24.
Jumbo mortgage interest rates
On average, the interest rate for a 30-year fixed rate jumbo mortgage on July 31 was 7.10%, up from 6.98% on July 24.
5/1 adjustable-rate mortgages
On average, the interest rate for a 5/1 ARM on July 31 was 6.95%, down from 6.96% on July 24.
What determines mortgage rates?
Mortgage rates are influenced by a variety of factors, including:
- Your credit score
- Down payment
- Your debt-to-income ratio (DTI)
- The type of loan you’re getting
- Loan term
- Interest rate type (fixed vs. adjustable)
- Inflation and the overall economy
- The Federal Reserve (which doesn’t set mortgage rates, but it certainly influences them)
APR vs. interest rate
If you’re currently shopping for a mortgage or considering refinancing, you’ve probably wondered why the quoted interest rate isn’t the same as the APR. That’s because the loan’s interest rate is what you pay the lender to borrow the money, while the APR (annual percentage rate) encompasses both the interest rate and all loan-related fees. Loan-related fees can include:
- Mortgage broker fees
- Loan origination fees
- Mortgage insurance premiums
- Some closing costs
The APR, therefore, is a truer measure of what it will actually cost you to borrow money to buy a home.
Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.
This article was reviewed by Lauren Williamson, who serves as the Home and Financial Services Editor for the Hearst E-Commerce team. Email her at [email protected].